It is hoped that manufactured blood derived from adult bone marrow or embryonic stem cells could end blood shortages caused by too few donors.
Synthetic blood could save crucial time in ambulances and on the battlefield because there would be no need to test a patient's blood type before administering a transfusion.
Scientists are developing artificial blood based on the "universal donor" group, O rhesus negative, which can be given to the vast majority of people regardless of their own blood group.
Marc Turner, from the University of Edinburgh, who is leading the program, said the first blood to be tested in human beings would be derived from adult bone marrow.
"Our current program will take another year to 18 months and by then we hope to have red cells of suitable quality and to go forward into trials," he said.
The ultimate goal is to produce red blood cells from embryonic stem cells, or adult skin cells.
Manufacturing blood from stem cells would have a huge advantage because these cells can multiply indefinitely in the laboratory and so could produce a limitless supply of blood. Such blood would have the additional benefit of not being at risk of infection from viruses such as HIV and hepatitis.