Tendon self-renewal is a rare occurrence because of the poor vascularization of this tissue; therefore, reconstructive surgery using autologous tendon is often performed in severe injury cases. However, the post-surgery re-injury rate is relatively high, and the collection of autologous tendons leads to muscle weakness, resulting in prolonged rehabilitation. Here, we introduce an induced pluripotent stem cell (iPSC)-based technology to develop a therapeutic option for tendon injury. First, we derived tenocytes from human iPSCs by recapitulating the normal progression of step-wise narrowing fate decisions in vertebrate embryos. We used single-cell RNA sequencing to analyze the developmental trajectory of iPSC-derived tenocytes. We demonstrated that iPSC-tenocyte grafting contributed to motor function recovery after Achilles tendon injury in rats via engraftment and paracrine effects. The biomechanical strength of regenerated tendons was comparable to that of healthy tendons. We suggest that iPSC-tenocytes will provide a therapeutic option for tendon injury.