A catheter having an improved electrode that minimizes irritation to the heart tissue and counters the occurrence of foreign body reactions is provided. The catheter comprises an elongated, flexible catheter body having proximal and distal ends and at least one lumen extending therethrough. At least one electrode, such as a tip electrode or ring electrode, is mounted on the distal end of the catheter body, wherein the electrode comprises a base material having an outer surface and a hydrogel layer applied over at least a portion of the outer surface of the base material. Preferably a drug or other therapeutic agent is incorporated into the hydrogel layer.