The natural reparative mechanisms triggered by tendon damage often lead to the formation of biomechanically inferior scar tissue that is prone to re-injury. Before the efficient application of stem cell-based regenerative therapies, the processes regulating tenocyte differentiation should first be better understood. Three-dimensional (3D) growth environments under strain and the exogenous addition of transforming growth factor beta3 (TGF-β3) have separately been shown to promote tendon differentiation. The aim of this study was to determine the ability of both of these factors to induce tendon differentiation of equine embryo-derived stem cells (ESCs). ESCs seeded into 3D collagen constructs can contract the matrix to a similar degree to that of tenocyte-seeded constructs and histologically appear nearly identical, with no areas of cartilage or bone tissue deposition. Tendon-associated genes and proteins Tenascin-C, Collagen Type I, and COMP are significantly up-regulated in the 3D ESC constructs compared with tenogenic induction in monolayer ESC cultures. The addition of TGF-β3 to the 3D cultures further up-regulates the expression of these genes and also induces the expression of mature tenocyte markers Tenomodulin and Thrombospondin-4. Our results show that when ESCs are exposed to the intrinsic forces exerted by a 3D culture environment, they express tendon-associated genes and proteins which are indicative of tenocyte lineage differentiation and that this effect is synergistically enhanced and accelerated by the addition of TGF-β3.