"The president believes that it's particularly important to sign this memorandum so that we can put science and technology back at the heart of achieving a broad range of national goals."
George Bush, Obama's predecessor as US president, was accused by scientists and politicians of injecting politics and religion into policy decisions on stem cells and other issues such as climate change, energy and contraception.
Legislation known as the Dickey Amendment limits the use of federal money spent on research that involves the creation or destruction of human embryos.
In 2001, Bush further tightened those restrictions on federal funding.
Barnes said scrapping the constraints imposed by Bush could even help boost the economy by creating jobs.
"Hallelujah! This marks the end of a long and repressive chapter in scientific history."
Dr Robert Lanza, Chief Scientific Officer at Advanced Cell Technology
Dr Harold Varmus, a US nobel prize winning scientist serving as an adviser to the Obama administration, said the president will give the NIH 120 days come up with a framework to govern the use of federal funds to work with human embryonic stem cells.
Varmus said that Obama "in effect, is allowing federal funding on human embryonic stem cells research to the extent that is allowed by law".
"There will be no explicit attempt to draw up what those guidelines will be," he said.
Dr Robert Lanza, Chief Scientific Officer at Advanced Cell Technology in Massachusetts, welcomed the expected changes.
"Hallelujah! This marks the end of a long and repressive chapter in scientific history. It's the stem cell 'emancipation proclamation'," he said.
Dr Douglas Melton, co-director of the Harvard Stem Cell Institute, noted that the process of getting federal funding itself is time-consuming but said his group would seek the money, alongside its other sources of funding.
"The removal of this barrier that has stood in our way for eight years will open important new areas of research, and help in moving the field forward more rapidly," he said.
Stem cells are long-living cells that are the source of all other cells in the body.
When taken from days-old embryos they are virtually immortal and can give rise to all the other cells and tissues in the body.
|Obama is expected to devolve legal and ethical rule-making on stem cells to the NIH [AFP]
Supporters say they can transform medicine and researchers have been working on using them to repair severed spinal cords, regenerate brain cells lost in cases of Parkinson's Disease and restore the tissue destroyed by juvenile diabetes.
But opponents warn the government crosses a moral line by supporting stem cell research and say the government should not fund programmes that require the destruction of human embryos.
In his election campaign, Obama spelled out his policy on stem-cell research in a list of answers to the Science Debate 2008 scientific lobby group.
"I strongly support expanding research on stem cells," Obama wrote.
"I believe that the restrictions that President Bush has placed on funding of human embryonic stem-cell research have handcuffed our scientists and hindered our ability to compete with other nations."
Stem cell research is controversial internationally, with Britain, Belgium, Sweden, Canada and New Zealand actively encouraging embryonic stem-cell research, while Austria, Lithuania and Poland have laws restricting such research.