Dr Craig Venter, a multi-millionaire pioneer in genetics, and his team have managed to make a completely new "synthetic" life form from a mix of chemicals.
They manufactured a new chromosome from artificial DNA in a test tube, then transferred it into an empty cell and watched it multiply – the very definition of being alive.
The man-made single cell "creature", which is a modified version of one of the simplest bacteria on earth, proves that the technology works.
Now Dr Venter believes organism, nicknamed Synthia, will pave the way for more complex creatures that can transform environmental waste into clean fuel, vaccinate against disease and soak up pollution.
But his development has also triggered debate over the ethics of "playing god" and the dangers of the new technology could pose in terms of biological hazards and warfare.
"We are entering an era limited only by our imagination," he said announcing the research published in the journal Science.
Dr Venter, a pioneer of genetic code sequencing and his team at the J Craig Venter Institute in Rockville, Maryland, have been chasing the goal for more than 15 years at a cost of £30m.
First they sequenced the genetic code of Mycoplasma genitalium, the world's smallest bacteria that lives in cattle and goats, and stored the information on a computer.
Then they used the computer code to artificially reproduce the DNA in the laboratory, slightly modifying it with a "watermark" so it was distinguishable from the original natural one.
Finally they developed a technique of stripping bacteria cells of all original DNA and substituting it with the new artificial code.
The resulting "synthetic cell" was then "rebooted" and it started to replicate. The ability to reproduce or replicate is considered the basic definition of life.
Dr Venter compared his work with the building of a computer. Making the artificial DNA was the equivalent of creating the software for the operating system. Transferring it to a cell was like loading it into the hardware and running the programme.
"This is the first synthetic cell that's been made, and we call it synthetic because the cell is totally derived from a synthetic chromosome, made with four bottles of chemicals on a chemical synthesizer, starting with information in a computer," said Dr Venter.
"This becomes a very powerful tool for trying to design what we want biology to do. We have a wide range of applications [in mind]," he said.
The researchers are planning to design algae that can capture carbon dioxide and make new hydrocarbons that could go into refineries.
They are also working on ways to speed up vaccine production, making new chemicals or food ingredients and cleaning up water, said Dr Venter.
While a major technological leap forward the life form is still incredibly simple in natural terms. Its DNA is made up of 485 genes, each strand of which is made up of one million base pairs, the equivalent of rungs on a ladder.
A human genome has 20,000 genes and three billion base pairs.
Nevertheless it is the beginning of the process that could lead to creation of much more complicated species, and into a world of artificial animals and people only envisaged in films such as Ridley Scott's Bladerunner and Steven Spielberg's Artificial Intelligence.
Professor Julian Savulescu, an expert in Practical Ethics at the University of Oxford, said: “Venter is creaking open the most profound door in humanity’s history, potentially peeking into its destiny.
"He is going toward the role of a god: creating artificial life that could never have existed naturally.
"The potential is in the far future, but real and significant: dealing with pollution, new energy sources, new forms of communication. But the risks are also unparalleled.
"We need new standards of safety evaluation for this kind of radical research and protections from military or terrorist misuse and abuse.
"These could be used in the future to make the most powerful bioweapons imaginable."
Dr David King, director of the watchdog Human Genetics Alert, said: “What is really dangerous is these scientists’ ambitions for total and unrestrained control over nature, which many people describe as ‘playing God’.
“Scientists’ understanding of biology falls far short of their technical capabilities. We have already learnt to our cost the risks that gap brings, for the environment, animal welfare and human health.”
Dr Venter has called for reviews so that debate keeps up with the science.
He said: "It's part of an ongoing process that we've been driving, trying to make sure that the science proceeds in an ethical fashion, that we're being thoughtful about what we do and looking forward to the implications to the future."