The approved cell lines, created for possible future disease treatments, were initially grown on mouse cells. That could expose humans to an animal virus their immune systems couldn't fight, the panel said. The experts said Monday that safer stem cell lines now exist, but those would not be eligible for federal funding.
The ethics panel announcement was the latest sign of the friction between stem cell scientists and Mr. Bush, who two years ago set limits on the controversial research which destroys human embryos.
Earlier this year, the director of the National Institutes of Health called on the president to lift his restrictions. And a number of scientists note that research into stem cells is progressing overseas.
A spokesman with President Bush's Health and Human Services Department said no one was available to comment on the ethics panel finding.
The medical ethics panel, which included scientists, philosophers, ethicists and lawyers from the United States and Europe, was formed by Johns Hopkins University to study the ethical questions arising as stem cells move from research to human trials and, possibly, to human therapy.
Embryonic stem cells have the ability to grow into all kinds of cells, and they are sought as potential treatments for victims of Alzheimer's and Parkinson's disease, diabetes and spinal cord injuries.
But because embryos discarded from fertility clinics are a major source of stem cells, the issue has sparked an ethical debate.
On Aug. 9, 2001, the president announced that federal money would be granted for research using only stem cell lines created by that date. That way, he hoped to stop the destruction of future human embryos.
Anti-abortion groups say stem cell research is tantamount to murder because it starts with the destruction of a human embryo to recover the cells.
And Pope John Paul II on Monday denounced as "morally contradictory" any medical treatment based on stem cells taken from embryo tissue. Vatican teaching holds that life begins at conception.
Mr. Bush has also called for a ban on human cloning — including the cloning of embryos solely to cull stem cells for research.
Ruth Faden, a member of the Johns Hopkins panel and director of the university's bioethics institute, said the destruction of human embryos "is a very weighty conclusion, and we're very mindful of that."
There are currently only 11 cell lines available for research, instead of more than 70 thought to be available when the president announced the restrictions, National Institutes of Health Director Elias Zerhouni said earlier this year when he called on Mr. Bush to ease his restrictions.
Those 11 cell lines were developed in the presence of mouse cells that provided needed growth factors. The cells can now be grown without mouse cells thanks to new methods developed using private funds or in other countries not subject to the U.S. restrictions.
Dr. John Gearhart, a panel member in whose Hopkins lab researchers first isolated and grew stem cells from human fetal tissue, said the panel's conclusion begged the question — "What do we do about it?"
"And what's being done about it is being done outside the United States," Gearhart said.
Because the cells currently approved in the United States couldn't ethically be used in humans, the panel said any tests would have to be private — putting them outside federal regulation designed to protect participants.
"That worries us," Faden said. "This is really a major step. The first time you do something in a human being that's never been done in a human being before is a very big problem. It's a challenge."
She said the panel was concerned that if the work was done without federal approval and oversight, "would there be the right kind of care taken ... to protect the first human subjects?"
The panel said the likelihood of getting to a clinical trial using only private funds was slim.
"All of that work might have to be done outside the United States," Faden said.
George Daley, a stem cell biologist at Harvard Medical School and Boston Children's Hospital, said, "I firmly believe that the current stem cell lines are unlikely to ever find their way into a patient.
"I think it's time for a review — time for President Bush to re-evaluate his position in light of the possibility of clinical trials within five years."
By Foster Klug