The purpose of this study was to characterize rat adipose-derived stem cells, induce adipose-derived stem cell tenogenesis, and analyze adipose-derived stem cell effects on tendon repair in vivo. Adipose-derived stem cells demonstrated an immunomodulatory, pro-angiogenic, and pro-proliferatory profile in vitro. Tenogenesis was induced for 1, 7, 14, and 21 days with 24 combinations of growth differentiation factor-5, 6, and 7 and platelet-derived growth factor-BB. Adipose-derived stem cells expression of scleraxis and collagen type I increased the most after 14 days of induction with growth differentiation factor-6 and platelet-derived growth factor-BB. Achilles excision defects injected with hydrogel alone (Gp2), with undifferentiated (Gp3) adipose-derived stem cells, or tenogenically differentiated (Gp4) adipose-derived stem cells exhibited improved tissue repair compared with untreated tendons (Gp1). Addition of adipose-derived stem cells improved tissue cytoarchitecture and increased expression of collagen type I and III, scleraxis, and tenomodulin. Adipose-derived stem cells significantly improved biomechanical properties (ultimate load and elastic toughness) over time more than hydrogel alone, while tenogenically differentiated adipose-derived stem cells improved the mean histological score and collagen fiber dispersion range closest to normal tendon. In addition, tendon sections treated with GFP-adipose-derived stem cells exhibited green fluorescence and positive GFP immunostaining on microscopy confirming the in vivo survival of adipose-derived stem cells that were injected into tendon defects to support the effects of adipose-derived stem cells on tissue up to 4.5 weeks post injury.