Derivation of human embryonic stem (ES) cells from preimplantation embryos ten years ago raised great hopes that they may be an excellent source of cells for cell replacement therapy. However, serious ethical concerns and the risk of immune rejection of allotransplanted cells have hindered the translation of ES cell-based therapies into the clinic. In an attempt to circumvent these barriers, a number of methods have been developed for converting adult somatic cells into a pluripotent state from which ethically acceptable patient-specific mature cells of interest could be derived. These efforts, backed by advances in elucidating the molecular basis of pluripotency, have culminated in successful reprogramming of fibroblasts into ES cell-like cells, termed induced pluripotent stem (iPS) cells, by ectopic expression of only a handful of "stemness" factors. iPS cells possess morphological, molecular and developmental features of conventional blastocyst-derived ES cells and have the potential to serve as a source of therapeutic cells for customized tissue repair, gene therapy, drug discovery, toxicological testing and for studying the molecular basis of human disease. The goal of this review is to provide the current state-of-the-art in this very exciting and dynamic field and to discuss barriers that remain to be removed before the therapeutic potential of iPS cells can be fully realized.