Research at the Northwestern University Feinberg School of Medicine, Chicago, found 17 out of 21 adults tested with relapsing-remitting MS, which is the most common form of the condition, saw their health improve as a result of the aggressive stem cell treatment.
Previous studies had found stem cell treatment could stabilise the condition, but it had not been suggested the same treatment could reverse it.
Richard K Burnt, who led the study, said: "The treatment is a feasible procedure that not only seems to prevent neurological progression, but also appears to reverse neurological disability."
The technique, called autologous non-myeloablative haemopoietic stem cell transplantation, suppresses the immune system and replenishes it with new cells. Doctors believe the new cells then "reset" a patient's immune system.
After a three-year follow-up 17 (81%) out of 21 sufferers tested improved by at least one point on a disability scale. No patient had a score lower than before the transplantation.
Dr Doug Brown, from the MS Society, said: "Stem cells are showing more and more potential in the treatment of MS and the challenge we now face is proving their effectiveness."