We have designed a composite scaffold for potential use in tendon or ligament tissue engineering. The composite scaffold was made of a cellularized alginate gel that encapsulated a knitted structure. Our hypothesis was that the alginate would act as a cell carrier and deliver cells to the injury site while the knitted structure would provide mechanical strength to the composite construct. The mechanical behaviour and the degradation profile of the poly(lactic-co-glycolic acid) knitted scaffolds were evaluated. We found that our scaffolds had an elastic modulus of 750 MPa and that they lost their physical integrity within 7 weeks of in vitro incubation. Autologous rabbit mesenchymal stem cell seeded composite scaffolds were implanted in a 1-cm-long defect created in the rabbit tendon, and the biomechanical properties and the morphology of the regenerated tissues were evaluated after 13 weeks. The regenerated tendons presented higher normalized elastic modulus of (60%) when compared with naturally healed tendons (40%). The histological study showed a higher cell density and vascularization in the regenerated tendons.