Valproic acid (VPA) is an effective and widely used anti-seizure medication but is teratogenic when used during pregnancy, affecting brain and spinal cord development for reasons that remain largely unclear. Here we designed a genetic recombinase-based SOX10 reporter system in human pluripotent stem cells that enables tracking and lineage tracing of Neural Crest cells (NCCs) in a human organoid model of the developing neural tube. We found that VPA induces extensive cellular senescence and promotes mesenchymal differentiation of human NCCs. We next show that the clinically approved drug Rapamycin inhibits senescence and restores aberrant NCC differentiation trajectory after VPA exposure in human organoids and in developing zebrafish, highlighting the therapeutic promise of this approach. Finally, we identify the pioneer factor AP1 as a key element of this process. Collectively our data reveal cellular senescence as a central driver of VPA-associated neurodevelopmental teratogenicity and identifies a new pharmacological strategy for prevention. These results exemplify the power of genetically modified human stem cell-derived organoid models for drug discovery.