President Bush's decision means that Federal funding will not be available for a key area in embryonic research in the study of stem cells. This work will continue however in privately funded labs without government funding.
His announcement only relates to the availability of tax payers' money for research and does not constitute a ban on laboratory work involving embryos. The lack of Federal funding will serve to slow progress however.
The key question facing Mr Bush was whether he would allow support for research that uses left-over or excess embryos taken from fertility clinics and his statement clearly blocks this.
Funding would be available for research that involves the 60 existing stem cell lines already produced by private labs, he said. These were developed using human embryos that had already been destroyed and "where the life and death decision has already been made", Mr Bush added.
This would allow stem cell research to progress "without crossing a fundamental moral line, by providing taxpayer funding that would sanction or encourage further destruction of human embryos that have at least the potential for life".
Frozen embryos from the clinics do retain a potential for life if implanted and so this important source of embryos for stem cell studies will remain out of bounds for Federal funding.
Private labs will however continue to have access to these embryos as they have in the past.
He expressed disquiet about the production of human embryos solely for experimentation, a reference to last month's revelation that a Virginia-based company was creating embryos specifically for research. Mr Bush described this as "deeply troubling" but his announcement will have no impact on the company's activity.
Nor will it affect a Boston company's announcement that it will use a form of embryo cloning to produce tissues for research, a process referred to as therapeutic cloning. The Virginia firm uses conventional in-vitro fertilisation to produce embryos but the Boston group will make embryos using the techniques that produced Dolly the cloned sheep.
The US House of Representatives has passed the Human Cloning Prohibition Act 2001 that would make all cloning and a great deal of embryo research illegal. The Act has yet to reach the Senate.