Drug-induced liver injury is a major reason for drug candidate attrition from development, denied commercialization, market withdrawal, and restricted prescribing of pharmaceuticals. The metabolic bioactivation of drugs to chemically reactive metabolites (CRMs) contribute to liver-associated adverse drug reactions in humans that often goes undetected in conventional animal toxicology studies. A challenge for pharmaceutical drug discovery has been reliably selecting drug candidates with a low liability of forming CRM and reduced drug-induced liver injury potential, at projected therapeutic doses, without falsely restricting the development of safe drugs. We have developed an in vivo rat liver transcriptional signature biomarker reflecting the cellular response to drug bioactivation. Measurement of transcriptional activation of integrated nuclear factor erythroid 2-related factor 2 (NRF2)/Kelch-like ECH-associated protein 1 (KEAP1) electrophilic stress, and nuclear factor erythroid 2-related factor 1 (NRF1) proteasomal endoplasmic reticulum (ER) stress responses, is described for discerning estimated clinical doses of drugs with potential for bioactivation-mediated hepatotoxicity. The approach was established using well benchmarked CRM forming test agents from our company. This was subsequently tested using curated lists of commercial drugs and internal compounds, anchored in the clinical experience with human hepatotoxicity, while agnostic to mechanism. Based on results with 116 compounds in short-term rat studies, with consideration of the maximum recommended daily clinical dose, this CRM mechanism-based approach yielded 32% sensitivity and 92% specificity for discriminating safe from hepatotoxic drugs. The approach adds new information for guiding early candidate selection and informs structure activity relationships (SAR) thus enabling lead optimization and mechanistic problem solving. Additional refinement of the model is ongoing. Case examples are provided describing the strengths and limitations of the approach. © The Author(s) 2020. Published by Oxford University Press on behalf of the Society of Toxicology.