The procedure needs further animal research to assess safety and long-term effectiveness but researchers said on Wednesday the experiment was an important proof of concept, marking a further advance in the growing field of regenerative medicine.
Marcelo Rivolta from Britain's University of Sheffield, who led the research, said the first patients could receive cell therapy for hearing loss in clinical trials in "a few years".
After treating 18 gerbils with complete deafness in one ear, his team reported in the journal Nature that stem cells produced an average 46 percent recovery in hearing function, as measured by electrical signals in the animals' brains.
"If this was a human patient, it would mean going from being so deaf as to be unable to hear a lorry or truck on the street to being able to maintain a conversation," Rivolta told reporters.
"What we have shown here is functional recovery using human stem cells, which is unique."
Gerbils were selected for the test because their hearing range is similar to that of humans, while mice - the usual choice for laboratory tests - hear at higher frequencies.
The animals were deafened using a drug to destroy their auditory nerves before receiving an injection of around 50,000 human embryonic stem cells, which had previously been treated with growth factors to coax them into becoming ear cells.
The response among the gerbils varied, depending on how well the new cells were integrated into the cochlea, the spiral-shaped cavity in the inner ear.
Deafness is caused primarily by loss of sensory hair cells in the ear and auditory nerves. Since these cells are created only in the womb, there is no way to repair them once they have been damaged, resulting in permanent hearing loss.
Cochlear implants offer a partial solution to loss of hair cells but there is no treatment for nerve loss, or auditory neuropathy, which accounts for 10-15 percent of cases of profound deafness.
Rivolta said stem-cell treatment would initially address nerve damage, although it could also be used in a wider range of patients if it was used in combination with implants.
Significant uncertainties remain.
In particular, the ability of embryonic stem cells to morph into any of the other cell types in the body means they can cause tumors - something that was not seen in the 10-week gerbil study but which Rivolta said needed longer study.
Another danger is that transplanted cells may be rejected by the recipient's immune system.
The research on deafness parallels more advanced work on the eye, where stem cells have already been shown to improve vision in small-scale human tests.
Doctors hope one day to use stem cells to treat a wide range of diseases such as Parkinson's, diabetes and cancer. But localized approaches in the eye or ear may be a promising first step, since fewer cells are involved.
Ralph Holme of the charity Action on Hearing Loss, which helped fund the Sheffield research, said the work was "tremendously encouraging" and gave hope of a fix to some types of hearing loss in the future.
"For the millions of people for whom hearing loss is eroding their quality of life, this can't come soon enough," he said. (Reuters)