Drugs and environmental chemicals can adversely alter the development of the fetus at critical periods during pregnancy, resulting in death, or in structural and functional birth defects in the surviving offspring. This process of teratogenesis may not be evident until a decade or more after birth. Postnatal functional abnormalities include deficits in brain function, a variety of metabolic diseases, and cancer. Due to the high degree of fetal cellular division and differentiation, and to differences from the adult in many biochemical pathways, the fetus is highly susceptible to teratogens, typically at low exposure levels that do not harm the mother. Insights into the mechanisms of teratogenesis come primarily from animal models and in vitro systems, and involve either receptor-mediated or reactive intermediate-mediated processes. Receptor-mediated mechanisms involving the reversible binding of xenobiotic substrates to a specific receptor are exemplified herein by the interaction of the environmental chemical 2,3,7,8-tetrachlorodibenzo-p-dioxin (TCDD or “dioxin”) with the cytosolic aryl hydrocarbon receptor (AHR), which translocates to the nucleus and, in association with other proteins, binds to AH-responsive elements (AHREs) in numerous genes, initiating changes in gene transcription that can perturb development. Alternatively, many xenobiotics are bioactivated by fetal enzymes like the cytochromes P450 (CYPs) and prostaglandin H synthases (PHSs) to highly unstable electrophilic or free radical reactive intermediates. Electrophilic reactive intermediates can covalently (irreversibly) bind to and alter the function of essential cellular macromolecules (proteins, DNA), causing developmental anomalies. Free radical reactive intermediates can enhance the formation of reactive oxygen species (ROS), resulting in oxidative damage to cellular macromolecules and/or altered signal transduction. The teratogenicity of reactive intermediates is determined to a large extent by the balance among embryonic and fetal pathways of xenobiotic bioactivation, detoxification of the xenobiotic reactive intermediate, detoxification of ROS, and repair of oxidative macromolecular damage.