The bank aims to store and supply stem cell lines - strings of identical cells - for research and possible treatment of conditions like diabetes, cancer and Parkinson's disease. Its store of cell lines is expected to number in the tens of thousands.
The bank, in Hertfordshire, southern England, will be funded by the Medical Research Council (MRC) and the Biotechnology and Biological Sciences Research Council.
Stem cells are master cells in the body that have the capability of being transformed into new cells or tissue.
They can be taken from adults and discarded umbilical cords, but those from embryos are considered especially powerful because each has the potential to become any sort of cell or tissue in development.
Researchers believe stem cells offer a potentially revolutionary way to repair diseased and damaged body tissue, but concede that more research is needed to understand exactly how they work.
"This potentially revolutionary research could benefit thousands of patients whose lives are blighted by devastating diseases"
"This potentially revolutionary research could benefit thousands of patients whose lives are blighted by devastating diseases," British Health Minister Lord Warner said.
But opponents say such research involves the "wanton creation and destruction of human life" and have condemned the bank as a storage site for dead babies.
The bank puts Britain into conflict with pro-life campaigners and with the United States, where President George Bush issued an executive order in August 2001 limiting federal funds for embryonic stem-cell research.
Anti-abortion groups argue that the bank is unethical because the extraction of stem cells from human embryos violates the human rights of the embryos.
"Our problem is in the marketing and developing of embryonic stem cells, whose existence depend on a massive destruction of early human life," the Pro-Life Party said.
Reducing human life?
Patrick Cusworth, spokesman for the LIFE anti-abortion group, argued that stem cell research reduces human life to "little more than a pharmaceutical product" and holds out "false hopes of cures for sufferers of debilitating conditions".
"Using human embryos as a tissue source is unethical, unnecessary and dangerous," he said. "Science must exist to benefit humanity - not the other way round."
"Using human embryos as a tissue source is unethical, unnecessary and dangerous. Science must exist to benefit humanity - not the other way round"
LIFE anti-abortion group
"Stem cell research offers real promise for the treatment of currently incurable diseases," Professor Colin Blakemore, Chief Executive of the MRC, said.
"The bank will ensure that researchers can explore the enormous potential of this exciting science for the future benefit of patients."
The bank's first two stem cell lines were developed separately by researchers at King's College London and the Centre for Life in Newcastle, northern England.