Transgenic animal models are powerful tools for developing a more detailed understanding on the roles of specific genes in biological pathways and systems. Applications of these models have been made within the field of toxicology, most notably for the screening of mutagenic and carcinogenic potential and for the characterization of toxic mechanisms of action. It has long been a goal of research toxicologists to use the data from these models to refine hazard identification and characterization to better inform human health risk assessments. This review provides an overview on the applications of transgenic animal models in the assessment of mutagenicity and carcinogenicity, their use as reporter systems, and as tools for understanding the roles of xenobiotic-metabolizing enzymes and biological receptors in the etiology of chemical toxicity. Perspectives are also shared on the future outlook for these models in toxicology and risk assessment and how transgenic technologies are likely to be an integral tool for toxicity testing in the 21st century.