Modern medicine, including minimally invasive surgeries, relies on optical fibers to efficiently transmit light into the human body. However, existing optical fibers exhibit poor mechanical compatibility with tissues and insufficient functionality. Herein is shown that a thin layer of hydrogel coating simultaneously improves the performance of optical fibers mechanically, optically, and functionally. By involving the hydrogel as a mechanically friendly skin, the optical fiber achieves surface tissue‐like softness and low friction, without compromising its bulk properties. With high transparency and low refractive index, the hydrogel coating helps form a step‐index profile for low‐loss light transmission. Furthermore, versatile functionalities by hydrogel‐coated optical fibers, like fluorescence generation, photothermal effect, pH sensing, and drug delivery, are conceptually demonstrated. This simple coating/core design that can easily incorporate extraordinary biocompatibility, extreme physical properties, and advanced functionality of hydrogels, will encourage more opportunities for the development of optical fibers in biomedical applications.