© 2019 The Author(s).Background: Since the discovery of the induced pluripotent stem cell (iPSC) technique more than a decade ago, extensive progress has been made to develop clinically relevant cell culture systems. Alzheimer's disease (AD) is the most common neurodegenerative disease, accounting for approximately two thirds of all cases of dementia. The massively increasing number of affected individuals explains the major interest of research in this disease as well as the strong need for better understanding of disease mechanisms. Main body: IPSC-derived neural cells have been widely used to recapitulating key aspects of AD. In this Review we highlight the progress made in studying AD pathophysiology and address the currently available techniques, such as specific differentiation techniques for AD-relevant cell types as well as 2D and 3D cultures. Finally, we critically discuss the key challenges and future directions of this field and how some of the major limitations of the iPSC technique may be overcome. Conclusion: Stem cell-based disease models have the potential to induce a paradigm shift in biomedical research. In particular, the combination of the iPSC technology with recent advances in gene editing or 3D cell cultures represents a breakthrough for in vitro disease modeling and provides a platform for a better understanding of disease mechanisms in human cells and the discovery of novel therapeutics.