Practically all lipid-soluble xenobiotics enter the conceptus through placental transfer. Many xenobiotics, including a number of clinically used drugs, are known to cause unwanted effects in the embryo or fetus, including in utero death, initiation of birth defects, and production of functional abnormalities. It is well established that numerous xenobiotics are not necessarily toxic as such, but are enzymatically transformed in the body to reactive and toxic intermediates. The cytochrome P450 (CYP) enzymes are known to catalyze oxidative metabolism of a vast number of compounds, including many proteratogens, procarcinogens, and promutagens. About 20 xenobiotic-metabolizing CYP forms are known to exist in humans. Most of these forms are most abundant in the liver, but examples of exclusively extrahepatic CYP forms also exist. Unlike rodents, the liver of the human fetus and even embryo possesses relatively well-developed metabolism of xenobiotics. There is experimental evidence for the presence of CYP1A1, CYP1B1, CYP2C8, CYP2D6, CYP2E1, CYP3A4, CYP3A5, and CYP3A7 in the fetal liver after the embryonic phase (after 8 to 9 weeks of gestation). Significant xenobiotic metabolism occurs also during organogenesis (before 8 weeks of gestation). Also, some fetal extrahepatic tissues, most notably the adrenal, contain substantial levels of CYP enzymes. The full-term human placenta is devoid of many CYP activities present in liver. Placental CYP1A1 is highly inducible by maternal cigarette smoking. Other forms present in full-term placenta include CYP4B1 and CYP19 (steroid aromatase), which also contribute to the oxidation of some xenobiotics. At earlier stages of pregnancy, the placenta may express a wider array of CYP genes, including CYP2C, CYP2D6, and CYP3A7. Due to the small size of the fetus and low abundance of CYPs in placenta, the contribution of feto-placental metabolism to overall gestational pharmacokinetics of drugs is probably minor. In contrast, several toxic outcomes have been ascribed to altered metabolic patterns in the feto-placental unit, including a putative association between reduced placental oxidative capacity and birth defects. Examples of human teratogens that are substrates for CYP enzymes include thalidomide, phenytoin, ethanol, and several hormonal agents. Recent studies have improved our understanding of the expression and regulation of individual CYP genes in the fetus and placenta, and the stage is set for applying this knowledge with more precision to the role of xenobiotic metabolism in abnormal intrauterine development in humans.