The announcement from the government's fertilisation authority means scientists from the University of Newcastle now have official permission to clone embryos.
"I can confirm that we have given approval," a spokeswoman from the Human Fertilisation and Embryology Authority (HFEA) told AFP.
It is thought to be the first such licence given in Europe.
Researchers at the University of Newcastle in northern England will be allowed to create embryos as a source of stem cells to cure diseases, a spokeswoman for the university said.
"It has taken a year of work, and I am most pleased that the HFEA has recognised the potential of this technology in modern medicine," Newcastle University's Dr Miodrag Stojkovic said in a statement.
The scientists said they plan to duplicate early-stage embryos and extract stem cells from them with the aim of developing new treatments for degenerative diseases such as Alzheimer's, Parkinson's and diabetes.
The embryos will be destroyed before they are 14 days old and will never be allowed to develop beyond a cluster of cells the size of a pinhead.
Cloning to create copies of human babies is outlawed in Britain, but therapeutic cloning is legal.