The development of complex in vitro hepatic systems and artificial liver devices has been hampered by the lack of reliable sources for relevant cell types, such as hepatic stellate cells (HSCs). Here we report efficient differentiation of human pluripotent stem cells into HSC-like cells (iPSC-HSCs). iPSC-HSCs closely resemble primary human HSCs at the transcriptional, cellular, and functional levels and possess a gene expression profile intermediate between that of quiescent and activated HSCs. Functional analyses revealed that iPSC-HSCs accumulate retinyl esters in lipid droplets and are activated in response to mediators of wound healing, similar to their in vivo counterparts. When maintained as 3D spheroids with HepaRG hepatocytes, iPSC-HSCs exhibit a quiescent phenotype but mount a fibrogenic response and secrete pro-collagen in response to known stimuli and hepatocyte toxicity. Thus, this protocol provides a robust in vitro system for studying HSC development, modeling liver fibrosis, and drug toxicity screening. Display omitted •A protocol mimicking liver development enables generation of HSCs from hPSCs•iPSC-HSCs possess properties similar to those of their in vitro counterparts•iPSC-HSCs can form liver spheroids when aggregated with hepatocytes•Liver spheroids can be used to model fibrosis and liver toxicity Coll et al. describe efficient differentiation of human pluripotent stem cells into hepatic stellate cell-like cells (iPSC-HSCs). iPSC-HSCs share phenotypic and functional features with primary HSCs and are useful for studying HSC development and for the generation of 3D in vitro liver systems for toxicity assessment and fibrosis modeling.