High-throughput screening technologies are widely used in the early stages of drug discovery to rapidly evaluate the properties of thousands of compounds. However, they generally rely on testing compound libraries on highly proliferative immortalized or cancerous cell lines, which do not necessarily provide an accurate indication of the effects of compounds in normal human cells or the specific cell type under study. Recent advances in stem cell technology have the potential to allow production of a virtually limitless supply of normal human cells that can be differentiated into any specific cell type. Moreover, using induced pluripotent stem cell technology, they can also be generated from patients with specific disease traits, enabling more relevant modelling and drug screens. This article discusses the opportunities and challenges for the use of stem cells in drug screening with a focus on induced pluripotent stem cells.