The treatment, which has been successfully trialled on animals, helps the body regrow tissue and cartilage that has been damaged by the degenerative condition.
Although still at an experimental stage, experts said the therapy could be "transformational" for millions of people in the world who suffer from the condition.
Early results suggest the treatment, developed by a team from Australian company Regeneus, could delay the need for joint repair by 10 or 20 years. There is the possibility that it could stop the disease's progression altogether if caught early, researchers said.
"This new stem cell therapy, if the trials continue to show success, could be transformational," Judith Brodie, chief executive of Arthritis Care, told the Daily Mail Online.
"While the long-term effects are unknown, and there should be caution due to the early stage of development, Arthritis Care welcomes progress in treating this painful condition," Brodie said.
The first human trial took place last year at Sydney's Royal North Shore Hospital. Forty patients had injections of the patented HiQCell treatment. Although the results are not due to be published until 2013, Dr Richard Lilischkis from Regeneus said they had been "outstanding".
According to the researchers, the 6,000-pound treatment takes three hours, during which time the surgeons remove seven ounces of stomach fat using liposuction. The stem cells are harvested and then injected back into the patient's knee.
Dr Diana Robinson from Sydney Sportsmed Specialists, who is one of Regeneus' medical partners, said the pain-reliving effects were almost immediate, with improved knee function within 10 days.
"In some patients we've been able to show around 30 per cent cartilage regeneration after six months," she said, adding that pain improvement ranged from 30 to 100 per cent.
At present the treatment is only being trialled on dogs in the UK, but the firm may apply for a licence to start UK trials in the next few years.
Osteoarthritis occurs when there is damage in and around the joint which the body cannot repair. It usually develops in people over 50 years of age and is more common in women than in men.
