Treatment for the crippling condition is currently limited to basic pain relief or complex joint replacement surgery.
But trials using stem cells have shown “astonishing” results with tissue almost as good as new after just three months.
Professor Sue Kimber, who led the research, said: “This work represents an important step forward in treating cartilage damage using embryonic stem cells to form new tissue.
“It may offer a new line of therapy for people with crippling joint pain and we now need this process to be developed for patients.”
Osteoarthritis occurs when cartilage at the ends of bones wears away causing severe pain and stiffness.
Researchers say the latest experiments show the procedure could potentially be a “safe and effective treatment” for more than eight million people who suffer from joint damage and inflammation.
In the experiments, led by teams at Manchester University and Arthritis Research UK, discarded embryonic stem cells from IVF clinics were transformed into cartilage cells.
These were transplanted into rats with defective joints.
Tests showed the high-quality artificially grown tissue quickly aided the repair of the joint.