Animal trials of the electronic implant are about to begin and its makers say it could provide a more effective alternative to weight-loss surgery.
The chip is attached to the vagus nerve which plays a role in appetite as well as a host of other functions within the body.
Human trials of the implant could begin within three years, say its makers.
The work is being led by Prof Chris Toumazou and Prof Sir Stephen Bloom of Imperial College London.
It involves an 'intelligent implantable modulator', just a few millimetres across, which is attached using cuff electrodes to the vagus nerve within the peritoneal cavity found in the abdomen.
The chip and cuffs are designed to read and process electrical and chemical signatures of appetite within the nerve. The chip can then act upon these readings and send electrical signals to the brain reducing or stopping the urge to eat.
The researchers say identifying chemicals rather than electrical impulses will make for a more selective, precise instrument.
The project has just received over 7m euros (£5.9m; $9m) in funding from the European Research Council.
A similar device designed by the Imperial team has already been developed to reduce epileptic seizures by targeting the same vagus nerve.
"This is a really small microchip and on this chip we've got the intelligence which can actually model the neural signals responsible for appetite control," Prof Toumazou told the BBC.
"And as a result of monitoring these signals we can stimulate the brain to counter whatever we monitor.
"It will be control of appetite rather than saying don't eat completely. So maybe instead of eating fast you'll eat a lot slower."
He said initial laboratory trials had already demonstrated proof of concept.
Prof Bloom, who heads Imperial's diabetes, endocrinology and metabolism division, said the chip could provide an alternative to "gross surgery".
The chip is described as an 'intelligent implantable modulator of vagus nerve function for treatment of obesity'
"There will be a little tiny insert and it will be so designed as to have no side effects, but restrict appetite in a natural way.
"As far as the brain is concerned, it will get the same signals from the intestinal system as it normally gets after a meal, and these signals tell it don't eat any more - the gut's full of food and you don't need to eat any more."
He claimed that unlike gastric banding, the chip would reduce both consumption and hunger pangs, and was therefore more likely to be effective.
Source: BBC News
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