We examined whether periosteum enhances the healing process of a tendon in a bone tunnel and leads to better biomechanical fixation in a shorter period of time. The effect of the periosteum-wrapped tendon on tendon-to-bone healing was analyzed in 20 New Zealand white rabbits. The animals were divided into two groups, a periosteum-wrapped group and a control group. The two legs were operated on in the same manner. The long digital extensor tendon was harvested and transplanted into the proximal tibial tunnel. One limb was transplanted with the tendon wrapped with periosteum, while the other was without periosteum. The healed tendon-bone attachment was evaluated after 3 and 6 weeks by histological examination and biomechanical testing. At all time points histological examination demonstrated more extensive bone formation around the tendon with closer apposition of new bone to the tendon in the periosteum-wrapped limb than in the control limb. Biomechanical testing demonstrated higher tendon pullout strength in the periosteum-wrapped limb at all time points, with statistically significant differences between the periosteum-wrapped limb and the control limb after 3 and 6 weeks. Histological and biomechanical data suggest superior healing at the periosteum-wrapped side. These findings demonstrate that periosteum enhances the healing process when a tendon graft is transplanted into a bone tunnel.