Stem cells found in the fluid that surrounds fetuses in the womb may be more flexible in treating diseases and conditions than originally thought, researchers said Monday.

Dr. Anthony Atala, the director of Wake Forest University's Institute of Regenerative Medicine, said that the study found amnion stem cells can form three-dimensional aggregates of cells known as embryoid bodies. Researchers believe that cells at this stage of development can be altered to become "virtually any cell in the human body."

"Amnion cells are on the way to become an important source for both basic science and regenerative medicine,' Atala said.

Atala's team is evaluating the cells for their potential to treat diabetes and kidney disease.

Atala and his co-workers obtain the cells using placentas or fluid from amniocentesis, a medical procedure commonly performed on unborn children to test for genetic diseases.

Such cells may avoid the controversy attached to embryonic stem cells. The embryos used for stem-cell research are four or five days old. The only way to get the cells is to destroy the embryo, which at that stage is a tiny, hollow ball of cells known as a blastocyst.

For the current study, scientists generated two lines of stem cells from amniotic fluid using the same protocol developed by Atala's lab. They investigated the incidence of embryoid body formation in all three lines.

"These stem cells allow for studying the effects of mutations causing human genetic diseases on specific cell-differentiation processes," Hengstschläger said.

One potential advantage of the cells is they can be grown in large quantities and are readily available during gestation and at the time of birth.

"Whether these cells are as versatile as embryonic stem cells remains to be determined, but the current finding is certainly encouraging," Atala said.

Another potential advantage is that while the cells meet some of the characteristics of pluripotency - the ability to form various cell types - they do not form tumors when implanted in animals, as some embryonic cells do.

Atala and his colleagues estimate that about 1 percent of cells in amniotic fluid are stem cells that have the ability to grown into bone, liver, muscle and other types of cells. His lab is working on the cells' ability to act like normal cells, research that he hopes will lead to therapy for patients with spinal-cord injuries, strokes and diseases, such as diabetes and Alzheimer's.

Atala has said he envisions a "bank" of amniotic stem cells for use in transplantation therapy.

An amniotic stem-cell bank from 100,000 people could provide genetic matches for 99 percent of the U.S. population, he said. Alternatively, he said, amniotic fluid or placenta could be banked for every baby and used in treatment if he or she developed a disease later in life.

The study is the second potential major research breakthrough on stem cells by the institute in nearly three years. Atala and Markus Hengstschläger, from the Medical University of Vienna, are lead researchers of the study, which appeared in the medical publication Oncogene. Hengstschläger's team was the first to prove stem cells existed in amniotic fluid.

This work builds off of previous research in the area of amniotic stem cells. In January 2007, Atala's team said they had used these cells to create functioning liver and other types of cells that may one day be used in treating disease.