The natural reparative mechanisms triggered by tendon damage often lead to the formation of biomechanically inferior scar tissue that is prone to re-injury. Before the efficient application of stem cell-based regenerative therapies, the processes regulating tenocyte differentiation should first be better understood. Three-dimensional (3D) growth environments under strain and the exogenous addition of transforming growth factor beta3 (TGFb3) have separately been shown to promote tendon differentiation. The aim of this study was to determine the ability of both of these factors to induce tendon differentiation of equine embryo-derived stem cells (ESCs). ESCs seeded into 3D collagen constructs can contract the matrix to a similar degree to that of tenocyte-seeded constructs and histologically appear nearly identical, with no areas of cartilage or bone tissue deposition. Tendon-associated genes and proteins Tenascin-C, Collagen Type I, and COMP are significantly up-regulated in the 3D ESC constructs compared with tenogenic induction in monolayer ESC cultures. The addition of TGFb3 to the 3D cultures further up-regulates the expression of these genes and also induces the expression of mature tenocyte markers Tenomodulin and Thrombospondin-4. Our results show that when ESCs are exposed to the intrinsic forces exerted by a 3D culture environment, they express tendon-associated genes and proteins which are indicative of tenocyte lineage differentiation and that this effect is synergistically enhanced and accelerated by the addition of TGF-b3.