Intrasynovial and extrasynovial donor autogenous flexor-tendon grafts were placed in the synovial sheaths of the medial and lateral digits of the forepaw in twenty dogs (forty tendons). Postoperatively, the dogs were managed with early, controlled, passive mobilization. Histological and ultrastructural evaluations were carried out at ten days, three weeks, and six weeks, and biomechanical analyses were performed at three and six weeks. The intrasynovial and extrasynovial tendon grafts showed different healing processes histologically. The extrasynovial tendon grafts healed with early ingrowth of peripheral adhesions, which appeared to become larger and more dense over time. These grafts exhibited decreased cellularity and early neovascularization at ten days, and there was evidence of progressive revascularization and cellular repopulation at three and six weeks. In contrast, the intrasynovial tendon grafts demonstrated minimum adhesions, and both cellularity and collagen organization were normal at each time-interval. The intrasynovial grafts had significantly more angular rotation at the proximal interphalangeal joint at three and six weeks than did the extrasynovial grafts (p < 0.05).