Rotator cuff (RTC) repair outcomes are unsatisfactory due to the poor healing capacity of the tendon bone interface (TBI). In our preceding study, tendon hydrogel (tHG), which is a type I collagen rich gel derived from human tendons, improved biomechanical properties of the TBI in a rat chronic RTC injury model. Here we investigated whether adipose‐derived stem cell (ASC)‐seeded tHG injection at the repair site would further improve RTC healing. Rats underwent bilateral supraspinatus tendon detachment. Eight weeks later injured supraspinatus tendons were repaired with one of four treatments. In the control group, standard transosseous suture repair was performed. In the ASC, tHG, tHGASC groups, ASC in media, tHG, and ASC‐seeded tHG were injected at repair site after transosseous suture repair, respectively. Eight weeks after repair, the TBI was evaluated biomechanically, histologically, and via micro CT. Implanted ASCs were detected in ASC and tHGASC groups 7 weeks after implantation. ACS implantation improved bone morphometry at the supraspinatus insertion on the humerus. Injection of tHG improved biomechanical properties of the repaired TBI. RTC healing in tHGASC group was significantly better than control but statistically equivalent to the tHG group based on biomechanical properties, fibrocartilage area at the TBI, and bone morphometry at the supraspinatus insertion. In a rat RTC chronic injury model, no biomechanical advantage was gained with ASC augmentation of tHG. Clinical Significance: Tendon hydrogel augmentation with adipose derived stem cells does not significantly improve TBI healing over tHG alone in a chronic rotator cuff injury model. © 2019 Orthopaedic Research Society. This article has been contributed to by US Government employees and their work is in the public domain in the USA.