The stem cells were brought to body temperature and put in a chemical mixture to encourage them to grow. They were "tagged" with a genetic marker which enabled the scientists to identify and separate so-called "germline" stem cells from which eggs and sperm are developed.
The male, XY stem cells underwent the crucial process of "meiosis" - halving the number of chromosomes. The process over creating and developing the sperm took four to six weeks.
The Newcastle team say the sperm were fully mature, mobile sperm and they have produced a video to back up the research.
Professor Karim Nayernia at Newcastle University and the NorthEast England Stem Cell Institute says: "This is an important development as it will allow researchers to study in detail how sperm forms and lead to a better understanding of infertility in men - why it happens and what is causing it.
"This understanding could help us develop new ways to help couples suffering infertility so they can have a child which is genetically their own.
"It will also allow scientists to study how cells involved in reproduction are affected by toxins, for example, why young boys with leukaemia who undergo chemotherapy can become infertile for life - and possibly lead us to a solution."
However, Professor Nayernia stressed the researchers had no intention of "producing human life in a dish".
Perfectly viable human embryos have been destroyed in order to create sperm over which there will be huge questions of their healthiness and viability
Josephine Quintavalle Comment on Reproductive Ethics
But Dr Allan Pacey, a sperm biologist at the University of Sheffield, said he was not convinced the sperm were fully developed.
"The quality of the images is not of sufficiently high resolution and I would need more data. They are early sperm, but functional tests would be needed to know exactly what has been achieved."
The sperm cannot be used for fertility treatment as this is prohibited under UK law. The scientists in Newcastle say it will be at least five years before the technique is perfected - when they believe it should be available to help infertile men.
This research also raises ethical issues. Josephine Quintavalle from Comment on Reproductive Ethics (Corethics) said: "This is an example of immoral madness. Perfectly viable human embryos have been destroyed in order to create sperm over which there will be huge questions of their healthiness and viability.
"It's taking one life in order to perhaps create another. I'm very much in favour of curing infertility but I don't think you can do whatever you like."
But John Harris, Professor of Bioethics at the University of Manchester, said: "I don't see any problems with the use of synthetic, or laboratory produced sperm.
"They will initially be used to make discoveries about the way sperm are formed and how problems arise, and that will be beneficial.
"Eventually it will be used to solve male infertility and that will be wholly beneficial.
"It seems to me this is one of those examples where people are groping around for a problem and there literally isn't one."
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