Organoids, which are three-dimensional (3D) multicellular structures derived from stem cells or tissue-specific progenitors, have emerged as a transformative platform for drug evaluation within tissue engineering and regenerative medicine (TERM). These models recapitulate human tissue complexity with greater fidelity than traditional two-dimensional cultures and animal models do, offering significant advantages in predicting human-specific drug responses, enabling personalized disease modeling, and accelerating drug development. This review critically examines advances, strategies, and challenges associated with the application of organoids for drug testing in TERM. We discuss diverse organoid types, including hepatic, cardiac, neural, gastrointestinal, lung, and tumor models, and their specific applications in assessing organ-specific toxicity, drug metabolism, and multiorgan interactions. Innovative methodologies such as organ-on-a-chip integration, multiorgan systems, and 3D bioprinting are highlighted as pivotal strategies for enhancing the physiological relevance and scalability of organoid models. Despite their considerable promise, organoids present several challenges, including limitations in reproducibility, long-term culture maturity, and functional complexity. Furthermore, ethical and regulatory considerations, particularly concerning patient-derived models and genetic modifications, must be addressed to facilitate the clinical translation of organoid-based drug testing. Finally, we explore future directions, including the integration of artificial intelligence-driven predictive models, clustered regularly interspaced short palindromic repeats (CRISPR)-based genome editing, and vascularization strategies, which hold potential for overcoming existing limitations and advancing the field of drug evaluation in regenerative medicine.