Establishing reliable and reproducible animal models for disease modelling, drug screening and the understanding of disease susceptibility and pathogenesis is critical. However, traditional animal models differ significantly from humans in terms of physiology, immune response, and pathogenesis. As a result, it is difficult to translate laboratory findings into biomedical applications. Although several animal models with human chimeric genes, organs or systems have been developed in the past, their limited engraftment rate and physiological functions are a major obstacle to realize convincing models of humans. The lack of human transplantation resources and insufficient immune tolerance of recipient animals are the main challenges that need to be overcome to generate fully humanized animals. Recent advances in gene editing and pluripotent stem cell-based xenotransplantation technologies offer opportunities to create more accessible human-like models for biomedical research. In this article, we have combined our laboratory expertise to summarize humanized animal models, with a focus on hematopoietic/immune system and liver. We discuss their generation strategies and the potential donor cell sources, with particular attention given to human pluripotent stem cells. In particular, we discuss the advantages, limitations and emerging trends in their clinical and pharmaceutical applications. By providing insights into the current state of humanized animal models and their potential for biomedical applications, this article aims to advance the development of more accurate and reliable animal models for disease modeling and drug screening.