A study, in the journal Nature Medicine, showed the engineered kidneys were less effective than natural ones.
But regenerative medicine researchers said the field had huge promise.
Kidneys filter the blood to remove waste and excess water. They are also the most in-demand organ for transplant, with long waiting lists.
Yet the lead researcher, Dr Harald Ott, told the BBC that restoring a small fraction of normal function could be enough: "If you're on haemodialysis then kidney function of 10% to 15% would already make you independent of haemodialysis. It's not that we have to go all the way."
He said the potential was huge: "If you think about the United States alone, there's 100,000 patients currently waiting for kidney transplants and there's only around 18,000 transplants done a year.
"I think the potential clinical impact of a successful treatment would be enormous."
Kidney failure, brought about by poor blood glucose control, is one of the biggest hazards diabetics face, this could be the start of a life saver for many.
More on this story here.