Stem cells have recently been isolated from humans and mice but not from rat tendon tissue. This study reports the isolation and characterization of stem cells from rat tendon. Nucleated cells isolated from rat flexor tendon tissues after collagenase digestion were plated at a low cell density to allow the selective proliferation of tendon-derived stem cells. About 1-2% of the cells isolated under this optimized culturing condition showed clonogenicity, high proliferative potential at low seeding density, and osteogenic, chondrogenic, and adipogenic multidifferentiation potential. These cells were CD44(+), CD90(+), CD34(-), and CD31(-). Although they shared some common properties with mesenchymal stem cells, they also exhibited their unique characteristics by expressing tenogenic and chondrogenic markers. There was expression of tenogenic markers, including alpha-smooth muscle actin, tenascin C, and tenomodulin, but not collagen type I at passage 0 (P0) and P3. Expression of a chondrogenic marker, aggrecan, was observed at P0 and P3, whereas expression of collagen type II was observed in few cells only at P3. The successful isolation of tendon-derived stem cells under the optimized growth and differentiation conditions was useful for future stem-cell-based tissue regenerative studies as well as studies on their roles in tendon physiology, healing, and disorders using the rat model.