Led by professor Takashi Tsuji from Tokyo University of Science, the team bioengineered hair follicles and transplanted them into the skin of hairless mice.
The creatures eventually grew hair, which continued regenerating in normal growth cycles after old hairs fell out.
When stem cells are grown into tissues or organs, they usually need to be extracted from embryos, but Tsuji and his researchers found hair follicles can be grown with adult stem cells, the study said.
"Our current study thus demonstrates the potential for not only hair regeneration therapy but also the realisation of bioengineered organ replacement using adult somatic stem cells," it said.
The combination of the new and existing technologies is expected to improve treatment for baldness, possibly allowing people to use their own cells for implants that will give them their hair back.
"We would like to start clinical research within three to five years, so that an actual treatment to general patients can start within a decade," said researcher Koh-ei Toyoshima.