Considerable hope surrounds the use of disease-specific pluripotent stem cells to generate models of human disease allowing exploration of pathological mechanisms and search for new treatments. Disease-specific human embryonic stem cells were the first to provide a useful source for studying certain disease states. The recent demonstration that human somatic cells, derived from readily accessible tissue such as skin or blood, can be converted to embryonic-like induced pluripotent stem cells (hiPSCs) has opened new perspectives for modelling and understanding a larger number of human pathologies. In this review, we examine the opportunities and challenges for the use of disease-specific pluripotent stem cells in disease modelling and drug screening. Progress in these areas will substantially accelerate effective application of disease-specific human pluripotent stem cells for drug screening.