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Alzheimer's disease (AD) is the most common form of age-related dementia, characterized by progressive memory loss and cognitive disturbance. Mutations of presenilin 1 (PS1) and presenilin 2 (PS2) are causative factors for autosomal-dominant early-onset familial AD (FAD). Induced pluripotent stem cell (iPSC) technology can be used to model human disorders and provide novel opportunities to study cellular mechanisms and establish therapeutic strategies against various diseases, including neurodegenerative diseases. Here we generate iPSCs from fibroblasts of FAD patients with mutations in PS1 (A246E) and PS2 (N141I), and characterize the differentiation of these cells into neurons. We find that FAD–iPSC-derived differentiated neurons have increased amyloid β42 secretion, recapitulating the molecular pathogenesis of mutant presenilins. Furthermore, secretion of amyloid β42 from these neurons sharply responds to γ-secretase inhibitors and modulators, indicating the potential for identification and validation of candidate drugs. Our findings demonstrate that the FAD-iPSC-derived neuron is a valid model of AD and provides an innovative strategy for the study of age-related neurodegenerative diseases.