Scientists have for the first time created a functional human liver from stem cells derived from skin and blood and say their success points to a future where much-needed livers and other transplant organs could be made in a laboratory.

While it may take another 10 years before lab-grown livers could be used to treat patients, the Japanese scientists say they now have important proof of concept that paves the way for more ambitious organ-growing experiments.

"The promise of an off-the-shelf liver seems much closer than one could hope even a year ago," said Dusko Illic, a stem cell expert at King's College London who was not directly involved in the research but praised its success.

He said however that while the technique looks "very promising" and represents a huge step forward, "there is much unknown and it will take years before it could be applied in regenerative medicine."

Researchers around the world have been studying stem cells from various sources for more than a decade, hoping to capitalise on their ability to transform into a wide variety of other kinds of cell to treat a range of health conditions.

There are two main forms of stem cells - embryonic stem cells, which are harvested from embryos, and reprogrammed "induced pluripotent stem cells" (iPS cells), often taken from skin or blood.

Countries across the world have a critical shortage of donor organs for treating patients with liver, kidney, heart and other organ failure. Scientists are keenly aware of the need to find other ways of obtaining organs for transplant.

The Japanese team, based at the Yokohama City University Graduate School of Medicine in Japan, used iPS cells to make three different cell types that would normally combine in the natural formation of a human liver in a developing embryo - hepatic endoderm cells, mesenchymal stem cells and endothelial cells - and mixed them together to see if they would grow.

They found the cells did grow and began to form three-dimensional structures called "liver buds" - a collection of liver cells with the potential to develop into a full organ.

When they transplanted them into mice, the researchers found the human liver buds matured, the human blood vessels connected to the mouse host's blood vessels and they began to perform many of the functions of mature human liver cells.

"To our knowledge, this is the first report demonstrating the generation of a functional human organ from pluripotent stem cells," the researchers wrote in the journal Nature.

Malcolm Allison, a stem cell expert at Queen Mary University of London, who was not involved in the research, said the study's results offered "the distinct possibility of being able to create mini livers from the skin cells of a patient dying of liver failure" and transplant them to boost the failing organ.

Takanori Takebe, who led the study, told a teleconference he was so encouraged by the success of this work that he plans similar research on other organs such as the pancreas and lungs.

A team of American researchers said in April they had created a rat kidney in a lab that was able to function like a natural one, but their method used a "scaffold" structure from a kidney to build a new organ.

And in May last year, British researchers said they had turned skin cells into beating heart tissue that might one day be able to be used to treat heart failure.

That livers and other organs may one day be made from iPS cells is an "exciting" prospect, said Matthew Smalley of Cardiff University's European Cancer Stem Cell Research Institute.

"(This) study holds out real promise for a viable alternative approach to human organ transplants," he said.

Chris Mason, a regenerative medicine expert at University College London said the greatest impact of iPS cell-liver buds might be in their use in improving drug development.

"Presently to study the metabolism and toxicology of potential new drugs, human cadaveric liver cells are used, " he said. "Unfortunately these are only available in very limited quantities".

The suggestion from this new study is that mice transplanted with human iPS cell-liver buds might be used to test new drugs to see how the human liver would cope with them and whether they might have side-effects such as liver toxicity. - Reuters