The Medical Research Council team showed severely damaged organs in mice could be restored to near-normal function.
They say the findings, published in Nature Cell Biology, could eventually help people stuck on a waiting list for a transplant.
Further tests are now taking place with human tissue.
The liver does have a remarkable ability to heal itself. Even if half of the organ is removed, it can grow back.
The team, based at the University of Edinburgh, has been investigating the regenerative potential of the liver.
Normally, the main type of cell in the liver - hepatocytes - is able to restore the organ.
But one of the researchers, Prof Stuart Forbes, said: "The hepatocytes normally divide beautifully, but eventually they give up that ability to keep dividing, they become senescent, and that is something we see in all forms of severe liver injury."
So the Edinburgh team turned to a closely related group of stem cells from the biliary duct.
Injecting these cells into damaged mouse livers led to near compete regeneration.
Prof Forbes added: "The big aim would be to develop a clinically applicable cell therapy for patients with severe liver failure where transplantation is not an option."
The team say tissue from livers unsuitable for transplant could be a source of these cells.
However, Prof Forbes said liver transplants would remain the main option for patients and encouraged people to join the donor register.
Further studies will now focus on repeating the results with human tissue.
Dr Rob Buckle, the director of science programmes at the Medical Research Council, said: "This research has the potential to revolutionise patient care by finding ways of co-opting the body's own resources to repair or replace damaged or diseased tissue."
Transplanting cells into livers has the potential to completely regenerate them, say scientists.