The value of human disease models, which are based on induced pluripotent stem cells (iPSCs), depends on the capacity to generate specifically those cell types affected by pathology. We describe a new iPSC-based model of Friedreich ataxia (FRDA), an autosomal recessive neurodegenerative disorder with an intronic GAA repeat expansion in the frataxin gene. As the peripheral sensory neurons are particularly susceptible to neurodegeneration in FRDA, we applied a development-based differentiation protocol to generate specifically these cells. FRDA and control iPSC lines were efficiently differentiated toward neural crest progenitors and peripheral sensory neurons. The progress of the cell lines through discrete steps of in vitro differentiation was closely monitored by expression levels of key markers for peripheral neural development. Since it had been suggested that FRDA pathology might start early during ontogenesis, we investigated frataxin expression in our development-related model. A pronounced frataxin deficit was found in FRDA iPSCs and neural crest cells compared to controls. Whereas we identified an upregulation of frataxin expression during sensory specification for control cells, this increase was not observed for FRDA peripheral sensory neurons. This early failure, aggravating frataxin deficiency in a specifically vulnerable human cell population, indicates a developmental component in FRDA.