The use of stem cells for tissue engineering (TE) encourages scientists to design new platforms in the field of regenerative and reconstructive medicine. Human embryonic stem cells (hESC) have been proposed to be an important cell source for cell-based TE applications as well as an exciting tool for investigating the fundamentals of human development. Here, we describe the efficient derivation of connective tissue progenitors (CTPs) from hESC lines and fetal tissues. The CTPs were significantly expanded and induced to generate tendon tissues in vitro, with ultrastructural characteristics and biomechanical properties typical of mature tendons. We describe a simple method for engineering tendon grafts that can successfully repair injured Achilles tendons and restore the ankle joint extension movement in mice. We also show the CTP's ability to differentiate into bone, cartilage, and fat both in vitro and in vivo. This study offers evidence for the possibility of using stem cell-derived engineered grafts to replace missing tissues, and sets a basic platform for future cell-based TE applications in the fields of orthopedics and reconstructive surgery.