In response, the Department of Health has pledged to put the matter before parliament for consideration.
The committee's investigation was prompted by the government's proposals on regulating the area coinciding with applications by scientists to create chimera embryos for stem cell research.
But although it recognises the "sincere ethical and moral" concerns raised by campaigners opposed to using embryos containing both animal and human cells, MPs put forward a case for "permissive legislation" to compensate for a shortage of available human eggs for research.
Committee chairman Phil Willis said that the government's response to its findings would be a test of its "commitment to science".
"We very much hope that the department will listen and reflect the committee's conclusions when the draft tissue and embryos bill is published next month," he said.
"We fully appreciate the concerns of those who oppose research into hybrid and chimera embryos – or indeed any human embryos – on moral and ethical grounds, but we feel that it is in the interests of science, the public and the UK that the current applications by King's College London and Newcastle University should be considered."
A DoH spokesperson insisted that the government still supported the "advance of science and medicine", reiterating its wish to "maintain the UK's position at the forefront of this technology".
"Whilst we have proposed an initial ban in general terms, we recognise that there may be potential benefits from such research and are certainly not 'closing the door' to it," the representative said.
Commenting on today's developments, Dr Tony Calland, chairman of the British Medical Association's medical ethics committee, said that the government's attempted prohibition of research could "cause serious delays to this very important research which is aimed at investigating many serious and debilitating conditions including Parkinson's and Alzheimer's disease".
And the Royal Society's stem cell working group chair Sir Richard Gardner stressed the importance of not allowing scientific progress to be "hampered by heavy-handed legislation".
"The technique to create human-animal cytoplasmic hybrids, as a potentially valuable way to overcome the shortage of human eggs for medical research, has only emerged within the past five years," he explained.
"We do not know what possibilities might emerge in the next five years so it is vital that new legislation can accommodate scientific breakthroughs."
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