Chemical similarity is a widely used concept in toxicology, and is based on the hypothesis that similar compounds should have similar biological activities. This forms the underlying basis for performing read-across, forming chemical groups and developing (Quantitative) Structure-Activity Relationships ((Q)SARs). Chemical similarity is often perceived as structural similarity but in fact there are a number of other approaches that can be used to assess similarity. A systematic similarity analysis usually comprises two main steps. Firstly the chemical structures to be compared need to be characterised in terms of relevant descriptors which encode their physicochemical, topological, geometrical and/or surface properties. A second step involves a quantitative comparison of those descriptors using similarity (or dissimilarity) indices. This work outlines the use of chemical similarity principles in the formation of endpoint specific chemical groupings. Examples are provided to illustrate the development and evaluation of chemical groupings using a new software application called Toxmatch that was recently commissioned by the European Chemicals Bureau (ECB), of the European Commission's Joint Research Centre. Insights from using this software are highlighted with specific focus on the prospective application of chemical groupings under the new chemicals legislation, REACH.