Degenerative diseases similarly as acute tissue injuries lead to massive cell loss and may cause organ failure of vital organs (e.g., heart, central nervous system). Therefore, they belong to a group of disorders that may significantly benefit from stem cells (SCs)-based therapies. Several stem and progenitor cell populations have already been described as valuable tools for developing therapeutic strategies in regenerative medicine. In particular, pluripotent stem cells (PSCs), including adult-tissue-derived PSCs, neonatal-tissue-derived SCs, embryonic stem cells (ESCs), and recently described induced pluripotent stem cells (iPSCs), are the focus of particular attention because of their capacity to differentiate into all the cell lineages. Although PSCs are predominantly envisioned to be applied for organ regeneration, they may be also successfully employed in drug screening and disease modeling. In particular, adult PSCs and iPSCs derived from patient tissues may not only be a source of cells for autologous therapies but also for individual customized in vitro drug testing and studies on the molecular mechanisms of disease. In this review, we will focus on the potential applications of SCs, especially PSCs i) in regenerative medicine therapies, ii) in studying mechanisms of disease, as well as iii) in drug screening and toxicology tests that are crucial in new drug development. In particular, we will discuss the application of SCs in developing new therapeutic approaches to treat degenerative diseases of the neural system and heart. The advantage of adult PSCs in all the above-mentioned settings is that they can be directly harvested from patient tissues and used not only as a safe non-immunogenic source of cells for therapy but also as tools for personalized drug screening and pharmacological therapies.