Researchers found a compound called JQ1 disrupts the development of sperm, decreasing sperm count and mobility.
But in a crucial finding, the effects of JQ1 are reversible.
Mice given the drug became infertile but when treatment stopped, sperm production returned to normal and healthy offspring were conceived afterwards.
There was also no impact on testosterone production or sex drive.
The study, published in the journal Cell, concluded that although the drug had been tested in mice it would probably work in humans due to reproductive similarities.
"These findings suggest that a reversible, oral male contraceptive may be possible," said study author Dr James Bradner from the Dana-Farber Cancer Institute in Boston.
Australian male fertility expert Professor Robert McLachlan said the researchers had targeted a factor in DNA remodelling that was essential for sperm production, blocking the cell division necessary to produce normal sperm.
However, he said lengthy research would be needed in animals before it could even begin tests in humans.
"The development of a potential contraceptive is a very long and arduous process leading up to the first human studies," said Prof McLachlan, the director of clinical research at Prince Henry's Institute in Victoria.
He said not all of the mice had sperm counts reduced to zero, and for the drug to be useful it would need to proven to be almost universally effective.
Although the reproductive systems in mice and men were similar, proof was needed in human sperm production.
"Research will need to confirm the authors' assertion that the drug is free of adverse effects on other tissues and that it is fully reversible," Prof McLachlan said.
"Ultimately, the compound will need to face the challenge of male contraception efficacy trials involving hundreds of couples over several years in order to assess its true effectiveness," he said.
He said the evaluation process could take around 15 years.
The authors, including Dr Martin Matzuk from Baylor College of Medicine, acknowledged there would be concern that targeting male cells would result in irreversible toxicity or infertility.
However, they said only full recovery was observed in the treated males.
"We envision that our discoveries can be completely translated to men, providing a novel and efficacious strategy for a male contraceptive," the study said.
The JQ1 compound was originally made at Dana-Farber to block a cancer-causing gene and has proved effective in laboratory tests of lung cancer and some blood cancers.
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