Implanted biomaterials often fail because they elicit a foreign body response (FBR) and concomitant fibrotic encapsulation. To design clinically relevant interference approaches, it is crucial to first examine the FBR mechanisms. Here, we report the development and validation of infrared-excited nonlinear microscopy to resolve the three-dimensional (3D) organization and fate of 3D-electrospun scaffolds implanted deep into the skin of mice and the following step-wise FBR process. We observed that immigrating myeloid cells (predominantly macrophages of the M1 type) engaged and became immobilized along the scaffold/tissue interface, before forming multinucleated giant cells. Both macrophages and giant cells locally produced vascular endothelial growth factor (VEGF), which initiated and maintained an immature neovessel network, followed by the formation of a dense collagen capsule two- to four-weeks post-implantation. Elimination of the macrophage/giant-cell compartment, by clodronate and/or neutralization of VEGF by VEGF Trap, significantly diminished giant-cell accumulation, neovascularization and fibrosis. Our findings identify macrophages and giant cells as incendiaries of the fibrotic encapsulation of engrafted biomaterials via VEGF release and neovascularization, and therefore as targets for therapy.