We constructed a new artificial collagen-based graft as a tendon proper and covered it with a polydioxanone sheath. This bioimplant was tested in vitro and also its effectiveness was tested in a large tendon defect model in vivo. A 2-cm full defect in the left Achilles tendon of all animals (n = 120) was created. The animals were andomly divided into three groups: control (n = 40), treated with collagen-based graft (n = 40) and treated with collagen-Polydioxanone-based graft (n = 40). Clinical examination was done weekly. The animals were euthanized at 60 and 120 days post-injury (DPI). The serum level of platelet-derived growth factor (PDGF) was measured. Hydroxyproline and dry matter content together with gross morphologic, histomorphometric, ultrastructural and biomechanical characteristics of the healing tissues were studied. The mechanism of host-graft interactions was studied in another 55 pilot animals. The graft was able to initiate inflammation, accelerate fibroplasia and improve remodeling of the neotenon in the defect area. Except for small remnants, most parts of the implants were gradually absorbed and substituted by a newly regenerated tendon. The preserved remnants were accepted as a part of neotenon and acted as scaffolds for the newly regenerated collagen fibrils. Unlike the controls, the treated lesions showed lower peritendinous adhesion, muscle fibrosis and atrophy and higher hydroxyproline concentration, dry matter content, ultimate strength, yield strength and modulus of elasticity. Numbers, diameter, density and differentiation of collagen fibrils were also greater in the treated lesions than the control ones. This study showed that the implant was cytocompatible, biodegradable, biocompatible and effective in tendon healing.