The US researchers have received a grant from the National Institutes of Health to begin work on the artificial testicle, which is predicted to take five to seven years to create.
If successful, it will improve the understanding of the complex process of sperm production, and scientists hope to use it to produce patient-specific sperm for men with fertility problems.
'Fertile sperm can be made from various stem cells in mice, but making human sperm from those same sources has been elusive', explained team leader Dr Paul Turek, director of the Turek Clinic, a men's health clinic in San Francisco.
Previous attempts to grow human sperm from stem cells in a lab have been problematic, with the cells unable to complete the process outside of the highly specialised environment of the testicle. While cells within the testicle normally go through around 12 stages before becoming mature sperm, they stop at stage nine or ten in a lab dish.
The new device, described as a 'sperm making biological machine', will recreate the natural home of sperm cell production. The researchers will first focus on Sertoli cells, important support cells, which help the sperm to develop. They will then add embryonic stem cells and engineer them to become immature sperm precursor cells.
Unlike a non-sperm-producing prosthetic implant for men missing a testicle, this device would not be designed to look like the real thing, but more like a 'cylindrical bag a few inches long', according to Dr Turek.
The artificial testicle would only last around 70 days, the time taken for one cycle of sperm production, before needing to be replaced.
Professor Kyle Orwig, who studies male fertility at the University of Pittsburgh, described the proposal as 'an ambitious project', saying that 'the major challenge will be figuring out how to get the human stem cells to become sperm precursor cells'.
However, he added: 'It would be fantastic if it happened. It would be a major impact on the fertility field'.