Every year a large number of diverse group of chemicals are introduced for industrial and pharmaceutical purposes. Despite their stringent safety screenings, some chemicals still prove to be hazardous to environmental and human health even after a prolong use. It is ascertained that birth defects are caused by prenatal exposure to teratogenic agents. This could be due to medication or drug exposures, maternal infections and diseases, or environmental and occupational exposures. Some chemicals are mutagenic that cause changes in the genetic material, usually in DNA sequences. Cord blood stem cells are increasing being studies for their therapeutic applications. We hypothesized that cord blood stem cells can also serve as a model system for investigating developmental and mutagenic effects of chemicals and pharmaceutical drugs. We studied several known and unknown teratogenic and mutagenic chemicals for their effect on the growth and differentiation of cord blood stem cells. These results showed that 5-fluorouracil and 6-mercaptopurine were cytotoxic at 10-8 M concentration and caused differentiation of CBSCs. 5-Azacitidine were found to be cytotoxic at 10-7 M concentration. Based on immunostaining of differentiated cells using specific antibodies, it was confirmed that these chemicals are not only toxic but caused differentiation of CBSCs. Further studies are in progress to determine molecular changes in CBSCs subjected to various douses of harzardous chemicals.