The use of embyronic stem cells is highly controversial
Scientists have taken skin cells from patients with eight different diseases and turned them into stem cells.
The advance means scientists are moving closer to using stem cells from the patient themselves to treat disease.
This would mean they could circumvent the ethical and practical problems of using embryonic stem cells, which has sparked much opposition.
Researcher Dr Willy Lensch, of Harvard Medical School, said the technique had "incredible potential".
He said it could help scientists understand the earliest stages of human genetic disease.
The stem cells were created by taking biopsies from patients with diseases such as Huntington's and muscular dystrophy.
However, scientists admit that many risks remain and therapies could still be well over a decade away.
Induced pluripotent stem (IPS) cells are adult stem cells which are made to act like embryonic ones - they gain the ability to become any cell in the human body.
But crucially, scientists do not have to destroy embryos to create a supply.
In principle, they could be used to treat a wide range of disorders, from diabetes to Parkinson's.
Rather than managing the symptoms of the disease, they would be used to regenerate the affected parts of the body.
"We're looking at the perfect human brick," said Dr Chris Mason, of the UK National Stem Cell Network.
"Ethical, flexible and not rejected by the patient because it comes from the patient themselves."
However, as yet, it is not a question of eliminating the use of embryonic stem cells - as some demand - but significantly expanding the existing "tool box".
In the UK, researchers in Nottingham are currently using IPS to examine heart conditions.
By taking skin cells from diseased patients, returning them to their embryonic form before redirecting them to becoming heart cells, a greater understanding of how heart disease develops can be gained, said Dr Chris Denning, of the University of Nottingham.
They can also be used to test drugs - potentially paving the way for more effective treatments.
But the actual transplantation of cells remains a long way off, as scientists have not yet been able to create the volumes needed.
There are also risks involved in any therapy. At present the stem cells need to be genetically modified in order to activate them.
But inserting genes can be dangerous, as they can inadvertently switch on cancer-causing oncogenes.
Scientists hope to reach a point in "the next few years" where no genetic modification is needed at all.
But they warn that even when there may be risks, a "safety-crazed society" should not stand in the way of what may be an effective treatment for some people.
"Obviously we want to make it as safe as possible," said Dr Mason.
"But as long as we quantify the risks and patents understand them - are able to put them in context - the choice should be there."
Dr Marita Pohlschmidt, of the Muscular Dystrophy Campaign, said IPS cells presented a good research tool for studying the biology of muscle diseases.
However, she added: "For the development of therapies, it is too early to assume that this technology will replace the use of embryonic stem cells and it is extremely important to give scientists the chance to explore both avenues before this decision can be made.
"This applies in particular to inherited diseases, because the genetic defect is present in every cell of the body and therefore iPS might only have limited benefits."