An in vitro seed culture system was established to grow peanut seed of different maturities viz. white, yellow, orange, brown and black, using a modified Murashige and Skoog medium. Under this system peanut seed of yellow, orange, brown and black maturity categories grew to maturity as measured by increase in their size and germinability. In vitro cultured seeds produced significant amounts of phytoalexins and were contaminated with aflatoxins following their inoculation with Aspergillus spp. while the noninoculated sterile controls did not produce any phytoalexins. Exposure of seed cultures to water stress using various concentrations of mannitol (0 to 1 M) and polyethylene glycol 8000 (0-30% w/v) caused a significant decrease in their phytoalexin producing ability, and enhanced fungal growth compared to the nonstressed controls. The seeds that were stressed with mannitol and subsequently inoculated with A. flavus and A. parasiticus showed a significant increase in the aflatoxin contamination of stressed seed compared to the unstressed control. This would indicate that in vitro grown seeds responded to water stress similar to the field grown peanuts by loosing their ability to produce phytoalexins and increased susceptibility to aflatoxin contamination. Hence, this system has a potential application in evaluating peanut genotypes for aflatoxin resistance under water stress.