The new cartilage is implanted into the knee joint
Doctors found the procedure was successful in more than 80% of patients.
It involves removing healthy cells from the knee, and growing them in a laboratory before they are reimplanted at the site of the damage.
The results of the study will be presented to conference at the Royal National Orthopaedic Hospital (RNOH), Stanmore, Middlesex, on Monday.
The technique has helped young people who damaged their knee, usually in sporting injuries, become more mobile, and even take up sport again.
Around a 100 patients, aged between 15 and 45, have taken part in the trial so far.
They either received the cell treatment, or the traditional procedure of 'mosaicplasty' where a piece of healthy cartilage is implanted in place of the damaged piece.
One to two years after the operation, both procedures produced an 80% success rate, but those who received the cell treatment have improved more.
Cell growth
Professor George Bentley of the RNOH told BBC News Online of how the new procedure took healthy cartilage cells from the patient.
They are then cultured in some of the patient's own blood serum, which contains growth agents, in a laboratory.
After three to four weeks, when enough cells have been grown, they are placed back into the knee to repair the damage.
As the original cells have come from the patient's own body, they will not be rejected by when they are implanted.
It takes about a year for the cells to fully regrow.
Skiing
Richard Painter, a 42-year-old director of a software company, was the first patient to have the treatment at the RNOH in June 1998.
Mr Painter, of Aldbury, Hampshire, said: "I am very pleased with my new knee and it is improving all the time.
"This year I was able to spend a week skiing and I have also taken up tennis.
"Back in 1989, I underwent conventional surgery for the damage to my cartilage with artificial material implanted in my knee but it began to wear out after four to five years."
Professor Bentley said: "Initial results of this revolutionary service which we are pioneering for the UK at RNOH are very encouraging.
"Cartilage transplantation has huge potential because the main alternative, in the longer term, is knee replacement.
"Knee replacement is expensive and has a limited life span so patients who suffer knee injuries when they are young could need three replacement operations and still be crippled in middle age."
However, demand for the new procedure could be high - an estimated 30,000 people a year in the UK suffer a knee injury which leaves permanent damage.
Each costs, on average, £3,000 - which doubles if patients need a replacement of the replacement.
Ongoing care and lost days of work also add to the cost of the operation.