Embryos surplus to therapeutic requirements following preimplantation genetic diagnosis can be used to derive human embryonic stem cell (hESC) lines carrying mutations significant to human disease. These cells provide a powerful in vitro tool for modelling disease progression in a number of cell types as well as having the potential to revolutionise drug discovery. Robust and reproducible directed differentiation protocols are needed to maximise the potential of these cells. In this review, we explore the current use of hESC and induced pluripotent stem cells in disease-specific research and discuss the use of stem cell technology in drug discovery and toxicity testing.