Stem cell biology has played a pivotal role in the field of disease modeling, regenerative medicine, and tissue engineering. The scope of stem cell research has been further extended to address the issues associated with toxicity and biosafety. However, its role in the field of neurotoxicity (NT) and the emerging field of developmental neurotoxicity (DNT) is somewhat underrepresented and needs thorough investigation. Several challenges have hindered the progress of NT and DNT studies, and there is a dire need for human-specific high-throughput in vitro system(s) as a tool with better predictivity, reliability, and reproducibility. The unique proliferation and pluripotency of stem cells makes them a tremendous resource for human material, allowing the prediction of drug toxicity and metabolic effects of chemicals. Recognizing the growing importance of NT and DNT and the application of stem cell biology, in this review article, we provide the diversified approaches of stem cell research which can be effectively applied to the NT and DNT studies and provide an update of the recent progress made so far. We further provide a futuristic approach towards novel stem cell-based strategies for NT and DNT testing. We have further discussed the current technologies, role of induced pluripotent stem cells, the application of three-dimensional (3D) cultures and role of stem cell-derived organs in the NT and DNT studies.