Alzheimer's disease (AD) is the most frequent cause of dementia. There is compelling evidence that the proteolytic processing of the amyloid precursor protein (APP) and accumulation of amyloid-β (Aβ) peptides play critical roles in AD pathogenesis. Due to limited access to human neural tissue, pathogenetic studies have, so far, mostly focused on the heterologous overexpression of mutant human APP in non-human cells. In this study, we show that key steps in proteolytic APP processing are recapitulated in neurons generated from human embryonic and induced pluripotent stem cell-derived neural stem cells (NSC). These human NSC-derived neurons express the neuron-specific APP(695) splice variant, BACE1, and all members of the γ-secretase complex. The human NSC-derived neurons also exhibit a differentiation-dependent increase in Aβ secretion and respond to the pharmacotherapeutic modulation by anti-amyloidogenic compounds, such as γ-secretase inhibitors and nonsteroidal anti-inflammatory drugs. Being highly amenable to genetic modification, human NSCs enable the study of mechanisms caused by disease-associated mutations in human neurons. Interestingly, the AD-associated PS1(L166P) variant revealed a partial loss of γ-secretase function, resulting in the decreased production of endogenous Aβ40 and an increased Aβ42/40 ratio. The PS1(L166P) mutant is also resistant to γ-secretase modulation by nonsteroidal anti-inflammatory drugs. Pluripotent stem cell-derived neurons thus provide experimental access to key steps in AD pathogenesis and can be used to screen pharmaceutical compounds directly in a human neuronal system.