Growing the hair from stem cells means scientists can create an unlimited supply for transplantation.
The team had previously had success in 2015, but the hair was haphazard and unnatural looking. Now they have created tufts of hair that look and feel real. It marks an important step towards the development of an injection that could treat hair loss.
"Our new protocol overcomes key technological challenges that kept our discovery from real-world use," said Dr Alexey Terskikh, an associate professor in Sanford Burnham Prebys' development, ageing and regeneration programme.
"Now we have a robust, highly controlled method for generating natural-looking hair that grows through the skin using an unlimited source of human stem cell-derived dermal papilla cells. This is a critical breakthrough."
His colleague, Dr Richard Chaffoo, added: "It could improve the lives of millions.
"Hair loss profoundly affects many people's lives. A significant part of my practice involves both men and women who are seeking solutions to their hair loss."
The findings received a merit award at the conference and the technology has been licensed.