Human pluripotent stem cells can differentiate into disease-relevant cell types, which capture the unique genome of an individual patient and provide insight into pathological mechanisms of human disease. Recently, human stem cell models for Alzheimer's disease (AD), the most common neurodegenerative dementia, have been described. Stem cell-derived neurons from patients with familial and sporadic AD and Down's syndrome recapitulate human disease phenotypes such as amyloid β peptide production, hyperphosphorylation of tau protein and endosomal abnormalities. Treatment of human neurons with small molecules can modulate these phenotypes, demonstrating the utility of this system for drug development and screening. This review will highlight the current AD stem cell models and discuss the remaining challenges and potential future directions of this field.