Development of the musculoskeletal system requires coordinated formation of distinct types of tissues, including bone, cartilage, muscle, and tendon. Compared to muscle, cartilage, and bone, cellular and molecular bases of tendon development have not been well understood due to the lack of tendon cell lines. The purpose of this study was to establish and characterize tendon cell lines. Three clonal tendon cell lines (TT-E4, TT-G11, and TT-D6) were established using transgenic mice harboring a temperature-sensitive mutant of SV40 large T antigen. Proliferation of these cells was significantly enhanced by treatment with bFGF and TGF-beta but not BMP2. Tendon phenotype-related genes such as those encoding scleraxis, Six1, EphA4, COMP, and type I collagen were expressed in these tendon cell clones. In addition to tendon phenotype-related genes, expression of osteopontin and Cbfal was observed. These clonal cell lines formed hard fibrous connective tissue when implanted onto chorioallantoic membrane in ovo. Furthermore, these cells also formed tendon-like tissues when they were implanted into defects made in patella tendon in mice. As these tendon cell lines also produced fibrocartilaginous tissues in tendon defect implantation experiments, mesenchymal stem cell properties were examined. Interestingly, these cells expressed genes related to osteogenic, chondrogenic, and adipogenic lineages at low levels when examined by RT-PCR. TT-G11 and TT-E4 cells differentiated into either osteoblasts or adipocytes, respectively, when they were cultured in cognate differentiation medium. These observations indicated that the established tendon cell line possesses mesenchymal stem cell-like properties, suggesting the existence of mesenchymal stem cell in tendon tissue.