The development is said to be an exciting step forward on bioengineering field that could save thousands who die due to kidney failure.
Prof Melissa Little, from the University of Queensland's Institute for Molecular Bioscience, said the team designed a protocol that prompted stem cells to "self-organise" into a mini-kidney in a dish, the 'The Age' newspaper reported.
"During self-organisation, different types of cells arrange themselves with respect to each other to create the complex structures that exist within an organ, in this case, the kidney," Little said.
Little said it could also be a powerful tool to identify drugs that could be harmful to the kidneys before they reached clinical trials.
"Three organs are often damaged by drugs - the liver, heart and kidney. If you could work out earlier which drugs were toxic to the kidney, you wouldn't spend half a billion dollars."
"Only one in four patients will receive a donated organ, and dialysis is an ongoing and restrictive treatment regime," she said.
Queensland Science Minister Ian Walker said, "The work by the IMB research team is an important milestone in developing improved treatments for chronic kidney disease and will ensure those with the condition can continue to live fulfilling and productive lives."
Little said the research was led by IMB, it also included the Murdoch Children's Research Institute and Monash University. The findings have been published in the scientific journal Nature Cell Biology.
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