A promising therapeutic approach for intestinal failure consists in elongating the intestine with a bio-engineered segment of neo-formed autologous intestine. Using an acellular biologic scaffold (ABS), we, and others, have previously developed an autologous bio-artificial intestinal segment (BIS) that is morphologically similar to normal bowel in rodents. This neo-formed BIS is constructed with the intervention of naïve stem cells that repopulate the scaffold in vivo, and over a period of time, are transformed in different cell populations typical of normal intestinal mucosa. However, no studies are available to demonstrate that such BIS possesses functional absorptive characteristics necessary to render this strategy a possible therapeutic application. The aim of this study was to demonstrate that the BIS generated has functional absorptive capacity. Twenty male August × Copenhagen-Irish (ACI) rats were used for the study. Two-centimeter sections of ABS were transplanted in the anti-mesenteric border of the small bowel. Animals were studied at 4, 8, and 12 weeks post-engraftment. Segments of intestine with preserved vascular supply and containing the BIS were isolated and compared to intestinal segments of same length in sham control animals (n = 10). d-Xylose solution was introduced in the lumen of the intestinal segments and after 2 h, urine and blood were collected to evaluate d-Xylose levels. Quantitative analysis was performed using ELISA. Morphologic, ultrastructural, and indirect functional absorption analyses were also performed. We observed neo-formed intestinal tissue with near-normal mucosa post-implantation as expected from our previously developed model. Functional characteristics such as morphologically normal enterocytes (and other cell types) with presence of brush borders and preserved microvilli by electron microscopy, preserved water, and ion transporters/channels (by aquaporin and cystic fibrosis transmembrane conductance regulator (CFTR)) were also observed. The capacity of BIS containing neo-formed mucosa to increase absorption of d-Xylose in the blood compared to normal intestine was also confirmed. With this study, we demonstrated for the first time that BIS obtained from ABS has functional characteristics of absorption confirming its potential for therapeutic interventions.