Surgical reconstruction of large tendon defects is technically demanding. Tissue engineering is a new option. We produced a novel tissue engineered, collagen based, bioimplant and in vitro characterizations of the implant were investigated. In addition, we investigated role of the collagen implant on the healing of a large tendon defect model in rabbits. A two cm length of the left rabbit's Achilles tendon was transected and discarded. The injured tendons of all the rabbits were repaired by Kessler pattern to create and maintain a 2 cm tendon gap. The collagen implant was inserted in the tendon defect of the treatment group (n = 30). The defect area was left intact in the control group (n = 30). The animals were euthanized at 60 days post injury (DPI) and the macro- micro- and nano- morphologies and the biomechanical characteristics of the tendon samples were studied. Differences of P < 0.05 were considered significant. The host graft interaction was followed at various stages of tendon healing, using pilot animals. At 60 DPI, a significant increase in number, diameter and density of the collagen fibrils, number and maturity of tenoblasts and tenocytes, alignment of the collagen fibrils and maturity of the elastic fibers were seen in the treated tendons when compared to the control ones (P < 0.05). Compared to the control lesions, number of inflammatory cells, amount of peritendinous adhesions and muscle fibrosis and atrophy, were significantly lower in the treated lesions (P < 0.05). Treatment also significantly increased load to failure, tensile strength and elastic modulus of the samples as compared with the control ones. The collagen implant properly incorporated with the healing tissue and was replaced by the new tendinous structure which was superior both ultra-structurally and physically than the loose areolar connective tissue regenerated in the control lesions. The results of this study may be valuable in the clinical practice.