MPs will bring in private legislation - which will be debated in September - to relax restrictions placed on embryonic stem cell research in 2002 under which only embryos left over from IVF programmes can be used.
An Australian government review of the laws last year recommended that scientists be allowed to harvest embryos for stem cell research, but the prime minister and his cabinet voted to leave the restrictions in place.
Kay Patterson, a former health minister, said she would draw up the legislation to ensure that the issue will be brought before parliament.
Stem cell research remains controversial and the issue is likely to split the Liberal-National Party government shortly after internal divisions prompted John Howard to abandon tough new measures on refugees.
"Putting a bill up on such a controversial issue will set mate against mate," Ron Boswell, the leader of the National Party in the Senate, said on Thursday.
He also said expanding the limits of research might create false hopes. "Don't be sucked in by false promises and false cures, of people leaping up from wheelchairs," he said. "It's not going to happen."
Tony Abbott, the current health minister and a Roman Catholic who once studied to be a priest, said he remained opposed to embryonic stem cell research because a five-day-old embryo is a human life.
"So I think that entitles it to a degree of respect, certainly I think it should be afforded more respect than it will get if it is created simply to be destroyed," Abbott said.
Natasha Stott Despoja, a senator for the Australian Democrats and a supporter of expanded stem cell research, said there was a strong case to change the laws.
"I think there's a strong argument for updating our stem cell laws specifically, yes, to do with somatic cell nuclear transfer and other options that give us hope for the future that would see government investment in these potential cures for some of the most debilitating diseases," she said.
Somatic cell nuclear transfer involves taking the nucleus from a non-reproductive cell and inserting it into an egg cell. The egg, with the new nuclear material, or DNA, inserted into it is then stimulated to divide and grow. This technique is used to clone animals.