Because it is impossible to use germ cells from a live dodo, scientists must first start with a pigeon germ cell and edit in dodo DNA before it can be transferred to a chicken.
Colossal said the breakthrough was "a pivotal step in bringing back the dodo", which "paves the way to create the world's first dodos in nearly 300 years".
It also opens the door for saving other species of birds.
"Our avian team's breakthrough in deriving culture conditions that allow pigeon primordial germ cells to survive long-term is a significant advancement for dodo de-extinction," said Ben Lamm, chief executive and co-founder of Colossal.
The flightless, 91cm-tall dodo became extinct in the 17th century, 100 years after it was discovered on the island of Mauritius.
Not only was it hunted by humans, it also became prey for the dogs, cats and pigs that arrived with sailors exploring the islands of the Indian Ocean.
In 2022, researchers sequenced the genome of the dodo for the first time, from a stuffed specimen in Denmark, and discovered that its closest relative was the Nicobar pigeon.
By using Nicobar pigeon DNA as a template, scientists can edit parts of the genetic code to make it closer to dodo DNA.
Colossal has established a colony of breeding Nicobar pigeons in Texas that have started laying eggs, and from those embryos the team has collected the first primordial germ cells.
Those germ cells are being grown in the lab, and will be tweaked to make them as close as possible to dodo DNA.
A flock of surrogate chickens, edited so they are ready for the dodo DNA, has also been created.
To make a dodo, the avian team is planning to inject the modified germ cells into developing chicks. When they grow up and mate, their eggs will hatch dodos rather than chickens.
Experiments have already shown that the cultured germ cells successfully migrate to the gonads when injected into the surrogate chicken embryos, which will be crucial for creating hybrids.
The team is so confident that they can bring back the dodo that they are already in talks with the Government of Mauritius to find a suitable habitat.
Colossal has also established the Mauritius Dodo Advisory Committee, to help develop a dodo rewilding programme. Dr Devina Lobine, of the Mauritius Institute of Biotechnology, who is leading the committee, said: "I am driven by a deep passion for scientific discoveries and inspired by the dream of seeing the dodo walk the earth once more.
"This journey is more than reviving a lost species - it is about honouring our island's unique heritage."
Colossal has already claimed to have brought back the extinct dire wolf, although some scientists have questioned that claim.
The firm is planning to resurrect the mammoth, but birds are trickier than mammals.
In mammals, it is possible to locate the DNA-containing nucleus and swap it into an egg cell, before implanting it into a surrogate.
But in birds, the nucleus is a tiny dot in the middle of the yolk which is virtually impossible to find.
Instead, scientists must create a surrogate which produces the DNA of another species when it breeds, known as a chimera.
Having a bank of pigeon germ cells and surrogate chickens, could also allow the team to resurrect other similar species, such as the critically endangered tooth-billed pigeon and the extinct Rodrigues solitaire.
"This breakthrough in culturing pigeon primordial germ cells represents a transformative tool for avian conservation," said Beth Shapiro, Colossal's chief science officer.
"By developing these protocols, we're establishing crucial bio-banking capabilities and opening new possibilities for genetic rescue of endangered species."
The research is published in the Journal of Heredity.