The transcriptional regulators underlying induction and differentiation of dense connective tissues such as tendon and related fibrocartilaginous tissues (meniscus and annulus fibrosus) remain largely unknown. Using an iterative approach informed by developmental cues and single cell RNA sequencing (scRNA-seq), we establish directed differentiation models to generate tendon and fibrocartilage cells from mouse embryonic stem cells (mESCs) by activation of TGFβ and hedgehog pathways, achieving 90% induction efficiency. Transcriptional signatures of the mESC-derived cells recapitulate embryonic tendon and fibrocartilage signatures from the mouse tail. scRNA-seq further identify retinoic acid signaling as a critical regulator of cell fate switch between TGFβ-induced tendon and fibrocartilage lineages. Trajectory analysis by RNA sequencing define transcriptional modules underlying tendon and fibrocartilage fate induction and identify molecules associated with lineage-specific differentiation. Finally, we successfully generate 3-dimensional engineered tissues using these differentiation protocols and show activation of mechanotransduction markers with dynamic tensile loading. These findings provide a serum-free approach to generate tendon and fibrocartilage cells and tissues at high efficiency for modeling development and disease.