Dioxin-like PCB126 is a persistent organic pollutant that causes a range of syndromes including developmental toxicity. Dioxins have a high affinity for aryl hydrocarbon receptor (AhR) and induce cytochrome P4501A (CYP1A). However, the role of CYP1A activity in developmental toxicity is less clear. To better understand dioxin induced developmental toxicity, we exposed zebrafish (Danio rerio) embryos to PCB126 at concentrations of 0, 16, 32, 64, and 128 μg L(-1) from 3-h post-fertilization (hpf) to 168 hpf. The embryonic survival rate decreased at 144 and 168 hpf. The fry at 96 hpf displayed gross developmental malformations, including pericardial and yolk sac edema, spinal curvature, abnormal lower jaw growth, and non-inflated swim bladder. The pericardial and yolk sac edema rate significantly increased and the heart rate declined from 96 hpf compared with the controls. PCB126 did not alter the hatching rate. To elucidate the mechanism of PCB126-induced developmental toxicity, we conducted ethoxyresorufin-O-deethylase (EROD) in vivo assay to determine CYP1A enzyme activity, and real-time PCR to study the induction of CYP1A mRNA gene expression in embryo/larval zebrafish at 24, 72, 96, and 132 hpf. In vivo EROD activity was induced by PCB126 at 16 μg L(-1) concentration as early as 72 hpf but significant increases were observed only in zebrafish exposed to 64 and 128 μg L(-1) doses (p < 0.005) at 72, 96, and 132 hpf. Induction of CYP1A mRNA expression was significantly upregulated in zebrafish exposed to 32 and 64 μg L(-1) at 24, 72, 96, and 132 hpf. Overall, the severe pericardial and yolk sac edema and reduced heart rate suggest that heart defects are a sensitive endpoint, and the general trend of dose-dependent increase in EROD activity and induction of CYP1A mRNA gene expression provide evidence that the developmental toxicity of PCB126 to zebrafish embryos is mediated by activation of AhR.