The U.S. Court of Appeals in Washington granted the Obama administration's request to allow the funding from the National Institutes of Health while it appeals a judge's order blocking the research.
The administration had argued that stopping the research while the case proceeds would irreparably harm scientific progress toward potentially lifesaving medical treatment.
U.S. District Judge Royce Lamberth had blocked President Barack Obama's research funding guidelines because he said it's likely they violate the law against federal funding of embryo destruction.
A three-judge panel of the appeals court issued an unusually quick decision, a day after hearing arguments over whether the funding could continue while it considers the case. The court also said it would expedite the case.
Researchers hope one day to use stem cells in ways that cure spinal cord injuries, Parkinson's disease and other ailments. Opponents say the research is a form of abortion because human embryos must be destroyed to obtain the stem cells.
A 1996 law prohibits the use of taxpayer dollars in work that harms an embryo, so batches have been culled using private money. But those batches can reproduce in lab dishes indefinitely, and Obama administration issued rules permitting taxpayer dollars to be used in work with the already created batches.
The administration thus expanded the number of stem cell lines created with private money that federally funded scientists could research, up from the 21 that President George W. Bush had allowed to 75 so far.
"President Obama made expansion of stem cell research and the pursuit of groundbreaking treatments and cures a top priority when he took office," White House spokesman Robert Gibbs said in a statement after the ruling. "We're heartened that the court will allow NIH and their grantees to continue moving forward while the appeal is resolved."
Ron Stoddart with Nightlight Christian Adoptions, which filed the suit and helps with the adoption of human embryos that are being stored in fertilization clinics, said the case promises to be a long and involved process. "I think that eventually Congress has to step up and deal with it," he said.