President Obama is expected to authorise the change by executive order today, according to officials. This reverses George Bush's decision to block the use of government money to fund research on embryonic stem cell lines created after 9 August 2001.
Correspondents say the policy change is part of President Obama's pledge to make clear that his administration wants scientific research to be free from political interference.
It expected that his announcement about federal money will be accompanied by a promise that what he calls "sound science" will be respected by his administration.
It is also thought that the announcement is timed to allow an adequate period for health officials to draw up research guidelines before a deadline for government stimulus money runs out.
Stem cells are cells with the capacity to turn into any other type of human cell, be it bone, muscle or nerve cell. One embryo can provide a limitless supply because the cell lines can be grown indefinitely.
But the use of human embryonic stem cells in research is controversial with some campaigners saying it is unethical.
The inability to use embryonic stem cells has led to some innovative research to find ways of using adult stem cells instead.
