Embryonic stem (ES) cells are unique as they have the potential to be generated in large numbers and the ability to differentiate into the three germ layers via embryoid body (EB) formation. This property could be utilized as an index to study initial mammalian development. We have investigated the utility of a comprehensively characterized human ES (hES) cell line (ReliCell®hES1) for testing the embryotoxic effects of compounds using cytotoxicity assays. Further, we performed real time gene expression analysis to check the alterations in germ layer markers expression upon drug treatment. The results show that assays using hES cells could serve as a reliable, sensitive and robust method to assess embryotoxic potential of compounds. They also provide a proof of concept that hES cells can be used as an in vitro model to demonstrate developmental toxicity, and to examine the germ layer-specific effects on differentiating EBs.