The Daily Telegraph quoted sources close to the panel advising the government on the merits of so-called therapeutic cloning as saying a change in the law to allow the practice would be recommended shortly.
A group of experts, led by the government's own chief medical officer for England Dr Liam Donaldson, has been examining the issues involved for over six months. They will conclude that the potential benefits outweigh any ethical objections, the newspaper said.
However, the Department of Health (DoH) refused to confirm or deny the story when contacted by the BBC, and said only that the report had yet to be finalised.
Early-stage embryos
The paper, which also carried a strong anti-therapeutic cloning editorial, quoted the sources as saying ministers would almost certainly accept a positive recommendation from the panel.
Therapeutic cloning is distinct from reproductive cloning - the latter aims to create whole-body, carbon copies of human beings.
The purpose of therapeutic cloning is to create only early-stage embryos from which stem cells could be harvested. Stem cells are the "master" cells in the body which have the potential to develop into any kind of tissue - bone, blood, nerve, muscle, etc.
Scientists believe the technologies now being developed could herald a revolution in medicine. They hope that if they can learn how to direct stem cell development, they will be able to grow up large volumes of transplant tissue in the lab. One day, it may even be possible to grow up whole organs. This would have a dramatic impact on current techniques that are hampered by donor shortages.
Perfect match
It is technically possible to obtain human embryonic stem cells from aborted foetuses and frozen IVF embryos. But scientists are keen to develop the cloning aspects of the technology because this would yield perfect match tissue that would not be rejected by the patient.
This would be done by taking DNA from the patient and fusing it with an empty egg cell.
However, any such research, whether on cloned material or not, would require alterations to the 1990 Human Fertilisation and Embryology Act. Pro-life groups and the Catholic Church would oppose these changes.
They regard it as unacceptable that scientists should "sacrifice" an embryo, which has the potential for human life, merely to harvest particular cells.
Commenting on the Daily Telegraph story, a Department of Health spokesman said: "This is speculative. The report by the expert group hasn't been finished yet and will have to go to ministers when it is published."
The spokesman said the panel's report would be issued "in the next few weeks".
Ethical debate
Embryologist and Labour peer Lord Winston - one of UK's most prominent fertility experts and a friend of Prime Minister Tony Blair - said a positive outcome to the review would be "an important step in the right direction".
But he stressed that it would not mean that human beings were being cloned. "There is no intention nor any ability to clone human embryos," he told BBC radio. "What we need to do is to derive tissue of an embryonic origin and then grow cell lines which would help human disease."
However, Professor Jack Scarisbrick, chairman of the anti-abortion group Life, said supporters of such experiments were trying to disguise the true nature of the work.
"It is cloning. It is producing an exact replica of another human being. And you take a bit from that human being and then kill it," he said.
He said stem cells should be obtained by methods that were not so ethically objectionable.