The mechanism of healing of a free tendon graft and also the role played by the synovial sheath is still obscure and debated. In the present study an effort is made to further elucidate these problems. In rabbits and dogs an experimental model was developed where a free tendon graft would be nourished by synovial fluid only. Macroscopically the grafts remained smooth, white and glistening without vascular ingrowth or adhesions during an observation period of 12 weeks. By histological and histochemical techniques the grafts as a whole were found viable up to 3 weeks. In a clinical series of 40 free flexor tendon grafts within the digital area as much as possible of the tendon sheath was preserved during grafting. The functional recovery was generally very good. The best results were obtained in those cases where most of the tendon sheath was preserved. No signs of defective graft survival were observed. Based on both experimental and clinical results from the present study it is concluded that there is no reason to excise the remaining tendon sheath within the critical zone in the digits. On the contrary preservation of the sheath contributes to survival of the graft and helps maintaining the integrity of gliding surfaces with maximal functional restoration and minimal formation of adhesions.