The chip is implanted under a woman's skin, releasing a small dose of levonorgestrel, a hormone.
This will happen every day for 16 years, but can be stopped at any time by using a wireless remote control.
The project has been backed by Bill Gates, and will be submitted for pre-clinical testing in the US next year - and possibly go on sale by 2018.
The device measures 20mm x 20mm x 7mm and will be "competitively priced", its creators said.
Convenience factor
Tiny reservoirs of the hormone are stored on a 1.5cm-wide microchip within the device.
A small electric charge melts an ultra-thin seal around the levonorgestrel, releasing the 30 microgram dose into the body.
There are other types of contraceptive implant available, the researchers noted, but all require a trip to a clinic and an outpatient procedure in order to be deactivated.
"The ability to turn the device on and off provides a certain convenience factor for those who are planning their family," said Dr Robert Farra from MIT.
The next challenge for the team is to ensure the absolute security of the device to prevent activation or deactivation by another person without the woman's knowledge.
"Communication with the implant has to occur at skin contact level distance," said Dr Farra.
"Someone across the room cannot re-programme your implant.
"Then we have secure encryption. That prevents someone from trying to interpret or intervene between the communications."
Huge range
The same technology could be used to administer other drugs.
Simon Karger, head of the surgical and interventional business at Cambridge Consultants, said that implanted technology like this faces a range of challenges and risks.
But he added that overall "the value to the patient of these types of implant can be huge and we foresee a future in which a huge range of conditions are treated through smart implanted systems".
The innovation comes at a time when governments and organisations around the world have agreed to try to bring family planning to around 120 million more women by 2020.
This challenge opens the door to this kind of implant technology being used in areas where access to traditional contraceptives is limited - a bigger priority, argued Gavin Corley, a biomedical engineer.
"That's a humanitarian application as opposed to satisfying a first-world need," he told the BBC.
Source: BBC News
