Tenomodulin (Tnmd) is a member of a new family of type II transmembrane glycoproteins. It is predominantly expressed in tendons, ligaments, and eyes, whereas the only other family member, chondromodulin I (ChM-I), is highly expressed in cartilage and at lower levels in the eye and thymus. The C-terminal extracellular domains of both proteins were shown to modulate endothelial-cell proliferation and tube formation in vitro and in vivo. We analyzed Tnmd function in vivo and provide evidence that Tnmd is processed in vivo and that the proteolytically cleaved C-terminal domain can be found in tendon extracts. Loss of Tnmd expression in gene targeted mice abated tenocyte proliferation and led to a reduced tenocyte density. The deposited amounts of extracellular matrix proteins, including collagen types I, II, III, and VI and decorin, lumican, aggrecan, and matrilin-2, were not affected, but the calibers of collagen fibrils varied significantly and exhibited increased maximal diameters. Tnmd-deficient mice did not have changes in tendon vessel density, and mice lacking both Tnmd and ChM-I had normal retinal vascularization and neovascularization after oxygen-induced retinopathy. These results suggest that Tnmd is a regulator of tenocyte proliferation and is involved in collagen fibril maturation but do not confirm an in vivo involvement of Tnmd in angiogenesis.