The researchers constructed a bacterium's "genetic software" and transplanted it into a host cell.
The resulting microbe then looked and behaved like the species "dictated" by the synthetic DNA.
The advance, published in Science, has been hailed as a scientific landmark, but critics say there are dangers posed by synthetic organisms.
The researchers hope eventually to design bacterial cells that will produce medicines and fuels and even absorb greenhouse gases.
The team was led by Dr Craig Venter of the J Craig Venter Institute (JCVI) in Maryland and California.
He and his colleagues had previously made a synthetic bacterial genome, and transplanted the genome of one bacterium into another.
Now, the scientists have put both methods together, to create what they call a "synthetic cell", although only its genome is truly synthetic.
Dr Venter likened the advance to making new software for the cell.
The researchers copied an existing bacterial genome. They sequenced its genetic code and then used "synthesis machines" to chemically construct a copy.
Dr Venter told BBC News: "We've now been able to take our synthetic chromosome and transplant it into a recipient cell - a different organism.
"As soon as this new software goes into the cell, the cell reads [it] and converts into the species specified in that genetic code."
The new bacteria replicated over a billion times, producing copies that contained and were controlled by the constructed, synthetic DNA.
"This is the first time any synthetic DNA has been in complete control of a cell," said Dr Venter.'New industrial revolution'
Dr Venter and his colleagues hope eventually to design and build new bacteria that will perform useful functions.
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Even some scientists worry we lack the means to weigh up the risks such novel organisms might represent, once set loose
"I think they're going to potentially create a new industrial revolution," he said.
"If we can really get cells to do the production that we want, they could help wean us off oil and reverse some of the damage to the environment by capturing carbon dioxide."
Dr Venter and his colleagues are already collaborating with pharmaceutical and fuel companies to design and develop chromosomes for bacteria that would produce useful fuels and new vaccines.
But critics say that the potential benefits of synthetic organisms have been overstated.
Dr Helen Wallace from Genewatch UK, an organisation that monitors developments in genetic technologies, told BBC News that synthetic bacteria could be dangerous.
"If you release new organisms into the environment, you can do more harm than good," she said.
"By releasing them into areas of pollution, [with the aim of cleaning it up], you're actually releasing a new kind of pollution.
"We don't know how these organisms will behave in the environment."
Dr Wallace accused Dr Venter of playing down the potential drawbacks.
"He isn't God," she said, "he's actually being very human; trying to get money invested in his technology and avoid regulation that would restrict its use."
But Dr Venter said that he was "driving the discussions" about the regulations governing this relatively new scientific field and about the ethical implications of the work.
Julian Savulescu Oxford University ethics professor
The risks are unparalleled, we need safety evaluation for this kind of radical research and protections from military or terrorist misuse
He said: "In 2003, when we made the first synthetic virus, it underwent an extensive ethical review that went all the way up to the level of the White House.
"And there have been extensive reviews including from the National Academy of Sciences, which has done a comprehensive report on this new field.
"We think these are important issues and we urge continued discussion that we want to take part in."
Dr Gos Micklem, a geneticist from the University of Cambridge, said that the advance was "undoubtedly a landmark" study.
But, he said, "there is already a wealth of simple, cheap, powerful and mature techniques for genetically engineering a range of organisms. Therefore, for the time being, this approach is unlikely to supplant existing methods for genetic engineering".
The ethical discussions surrounding the creation of synthetic or artificial life are set to continue.
Professor Julian Savulescu, from the Oxford Uehiro Centre for Practical Ethics at the University of Oxford, said the potential of this science was "in the far future, but real and significant".
"But the risks are also unparalleled," he continued. "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. The challenge is to eat the fruit without the worm."