The traditional drug discovery pipeline for the identification and development of compounds that selectively target specific molecules to ameliorate disease remains a major focus for medical research. However, the zebrafish is increasingly providing alternative strategies for various components of this pipeline. Zebrafish and their embryos are small, easily accessible and relatively low cost, making them applicable to high-throughput, small molecule screening. Zebrafish can also be manipulated by a range of forward and reverse genetics techniques to facilitate gene discovery and functional studies. Moreover, their physiological and developmental complexity provides accurate models of human disease to underpin mechanism of action and in vivo validation studies. Finally, several of these biological characteristics make zebrafish eminently suitable for toxicity testing, including eco-toxicology. Here we review the application of zebrafish to preclinical drug development and toxicity testing, including recent advances in mutant generation, drug screening and toxicology that serve to further enhance the capabilities of this valuable model organism in drug discovery.