Induced pluripotent stem cells (iPSCs) share many characteristics with embryonic stem cells (ESCs), but circumvent most of the ethical issues surrounding ESCs. The use of iPSCs to treat liver diseases is gaining increasing interest. Recent studies show these iPSCs can be differentiated into the hepatic lineage and provide an accurate model for liver diseases, drug screening and drug toxicity testing. Recently, the potential application of iPSC-derived hepatocytes to be used in cell-based therapies has been explored as a novel strategy to treat human liver disease. However, the successful use of these iPSC-derived hepatocytes hinges on overcoming the inherent problems of using iPSC in cell-based therapies. Given these problems are addressed in the future, these iPSC derived hepatocytes provide a limitless supply of cells that could be used to treat liver diseases not only in screening and toxicity testing but also in cell-based therapies.