According to figures, age-related macular degeneration that results from dying retinal cells, affects one in seven older Australians and costs the 5.15 billion dollars a year.
The team at Melbourne's Centre for Eye Research Australia (CERA) takes skin cells from affected patients, turns them into stem cells and then into new retinal cells, Herald Sun reported.
These cells are then compared with the patient's damaged cells, allowing them to see in detail what's gone wrong.
A new charity, the National Stem Cell Foundation of Australia, has devoted its first investment to the project, bringing Kathryn Davidson, a US stem cell expert, to the centre from Seattle.
Davidson said that stem cell research has lets her team "mimic the disease in a dish," with a view to finding means for better diagnosis and treatment.