Familial dysautonomia is a rare and fatal peripheral neuropathy caused by a mutation in the gene IKBKAP that encodes a protein involved in transcriptional elongation. Lee et al. report the derivation of patient-specific iPS (induced pluripotent stem) cells and the directed differentiation into cells of all three germ layers including peripheral neurons. Gene expression analysis revealed tissue-specific mis-splicing of IKBKAP in vitro, with the patients' neural crest precursors expressing particularly low levels of normal IKBKAP transcript, suggesting a mechanism for disease specificity. Transcriptome analysis and cell-based assays showed defects in neurogenic differentiation and migration behaviour. This work is a step towards using iPS technology to produce relevant human disease models, and in functional assays for the identification of candidate drugs. The derivation and differentiation of disease-specific human induced pluripotent stem cells (iPSCs) offers a new strategy for modelling disease. Familial dysautonomia (FD) is a rare but fatal peripheral neuropathy caused by a mutation in the IKBKAP gene. Here, patient-specific FD-iPSCs are derived and differentiated into cells of all three germ layers, including peripheral neurons; the cells are then analysed for mechanism of disease specificity and response to candidate drugs. The isolation of human induced pluripotent stem cells (iPSCs)1,2,3 offers a new strategy for modelling human disease. Recent studies have reported the derivation and differentiation of disease-specific human iPSCs4,5,6,7. However, a key challenge in the field is the demonstration of disease-related phenotypes and the ability to model pathogenesis and treatment of disease in iPSCs. Familial dysautonomia (FD) is a rare but fatal peripheral neuropathy, caused by a point mutation in the IKBKAP8 gene involved in transcriptional elongation9. The disease is characterized by the depletion of autonomic and sensory neurons. The specificity to the peripheral nervous system and the mechanism of neuron loss in FD are poorly understood owing to the lack of an appropriate model system. Here we report the derivation of patient-specific FD-iPSCs and the directed differentiation into cells of all three germ layers including peripheral neurons. Gene expression analysis in purified FD-iPSC-derived lineages demonstrates tissue-specific mis-splicing of IKBKAP in vitro. Patient-specific neural crest precursors express particularly low levels of normal IKBKAP transcript, suggesting a mechanism for disease specificity. FD pathogenesis is further characterized by transcriptome analysis and cell-based assays revealing marked defects in neurogenic differentiation and migration behaviour. Furthermore, we use FD-iPSCs for validating the potency of candidate drugs in reversing aberrant splicing and ameliorating neuronal differentiation and migration. Our study illustrates the promise of iPSC technology for gaining new insights into human disease pathogenesis and treatment.