UK scientists planning to mix human and animal cells in order to research cures for degenerative diseases fear their work will be halted.
Early embryos yield stem cells
They accuse the body that grants licences for embryo research, the HFEA, of bowing to government pressure if it fails to consider their applications.
Ministers proposed outlawing such work after unfavourable public opinion.
PM Tony Blair said any new law would have "flexibility" to support scientific research that helped people.
He said there were "difficult" issues surrounding creating the embryos, which are more than 99% human but have a small animal component.
He added: "I'm sure that research that's really going to save lives and improve the quality of life will be able to go forward."
The Human Fertilisation and Embryology Authority is to discuss if two research requests come under its remit.
The creation of hybrid human-animal embryos was first suggested as a way of addressing the shortage of human eggs available for research.
But the HFEA says it is unresolved whether this type of controversial work is permissible under existing laws - or even whether it falls under the HFEA's jurisdiction to grant a licence.
Opponents say the work tampers with nature and is unethical.
The researchers have called for greater understanding of what they are trying to achieve.
The public was consulted on hybrid embryo work among other issues for an overhaul of outdated laws on fertility treatments and embryo research.
Ministers felt the Human Fertilisation and Embryology Act 1990 needed to be updated as science has moved on significantly.
The new white paper says scientists will be able to push forward research in some areas, such as altering the genetic structure of cells that make embryos.
But government proposes prohibiting them from making human-animal hybrids or so-called "chimeras" - where genetic material is taken from humans and put into a host animal egg.
That is then allowed to grow to a very early embryo stage in the lab as a source of stem cells for research.
Scientists are hopeful that studies on stem cells - immature cells that can become many types of tissue - could lead to greater understanding and even a cure for many diseases, including Alzheimer's.
They say using human-animal mixes rather than human eggs to get the stem cells makes sense because human eggs are in short supply, plus the process is less cumbersome and yields better results.
Professor Chris Shaw from Kings College London, along with his colleague Dr Stephen Minger, has applied for a licence for stem cell work on Motor Neurone Disease.
He said: "To shut this down at the moment is a real affront to patients. We do not have a single drug that makes a difference to the disease course."
Dr Minger, who hopes to look at the genetic causes of conditions like Parkinson's disease, said he had been told that the HFEA was unlikely to grant his application.
A second team of scientists, led by Professor Lyle Armstrong at Newcastle University, has applied to research how different tissues grow in the body.
Dr Evan Harris MP, Liberal Democrat member of the Science and Technology Select Committee, warned there would be fierce opposition from scientists and parliamentarians to any draft bill which included such a ban.
An HFEA spokesman said: "We need to decide whether the law prohibits this research, whether it falls under our remit at all, and then we can look at whether we have a fundamental view on this type of research.
"We have a duty to consider any application put before us."
If the HFEA decides it is outside its remit, the scientists will not legally need a licence to continue with their work.
A spokesman for the Department of Health stressed that the new law, which still needs to be debated in Parliament, would contain a clause allowing for the possibility that this type of work should be permitted in the future.
Josephine Quintavalle, of CORE ethics, said: "This is creating an animal-human hybrid and that has to be acknowledged as something that does not meet with approval.
"We hope that the HFEA has found this is one hurdle too many and they are not prepared to jump over it."