Pulmonary drug delivery presents a unique opportunity to target lower airway inflammation, which is often characterized by the massive recruitment of neutrophils from blood. However specific therapies are lacking that can modulate airway neutrophil function, and difficult challenges must be overcome to achieve therapeutic efficacy against pulmonary inflammation, notably drug hydrophobicity, mucociliary and macrophage-dependent clearance, and high extracellular protease burden. Here, we present a multi-stage, aerodynamically favorable delivery platform that uses extracellular proteolysis to its advantage in order to deliver nanoparticle-embedded hydrophobic drugs to neutrophils within the lower airways. Our design consists in a self-regulated nanoparticle-in-microgel system, in which microgel activation is triggered by extracellular elastase (degranulated by inflammatory neutrophils), and nanoparticles are loaded with Nexinhib20, a potent neutrophil degranulation inhibitor. Successful in vivo delivery of Nexinhib20 to the airways and into neutrophils promoted resolution of the inflammatory response by dampening neutrophil recruitment and degranulation, pro-inflammatory cytokine production in both airway and systemic compartments, as well as the presence of neutrophil-derived pathological extracellular vesicles in the lung fluid. Our findings showcase a new platform that overcomes challenges in pulmonary drug delivery and allows customization to match the proteolytic footprint of given diseases.