Schizophrenia (SCZ) is a devastating mental disorder that is characterized by distortions in thinking, perception, emotion, language, sense of self, and behavior. Epidemiological evidence suggests that subtle perturbations in early neurodevelopment increase later susceptibility for disease, which typically manifests in adolescence to early adulthood. Early perturbations are thought to be significantly mediated through incompletely understood genetic risk factors. The advent of induced pluripotent stem cell (iPSC) technology allows for the in vitro analysis of disease-relevant neuronal cell types from the early stages of human brain development. Since iPSCs capture each donor’s genotype, comparison between neuronal cells derived from healthy and diseased individuals can provide important insights into the molecular and cellular basis of SCZ. In this review, we discuss results from an increasing number of iPSC-based SCZ/control studies that highlight alterations in neuronal differentiation, maturation, and neurotransmission in addition to perturbed mitochondrial function and micro-RNA expression. In light of this remarkable progress, we consider also ongoing challenges from the field of iPSC-based disease modeling that call for further improvements on the generation and design of patient-specific iPSC studies to ultimately progress from basic studies on SCZ to tailored treatments.