Pericytes (PCs) are a type of perivascular cells that surround endothelial cells of small blood vessels. In the brain, PCs show heterogeneity depending on their position within the vasculature. As a result, PC interactions with surrounding endothelial cells, astrocytes, and neuron cells play a key role in a wide array of neurovascular functions such as regulating blood-brain barrier (BBB) permeability, cerebral blood flow, and helping to facilitate the clearance of toxic cellular molecules. Therefore, a reliable method of engineering brain-specific PCs from human induced pluripotent stem cells (hiPSCs) is critical in neurodegenerative disease modeling. This review summarizes brain-specific PC differentiation of hiPSCs through mesoderm and neural crest induction. Key signaling pathways (platelet-derived growth factor-B [PDGF-B], transforming growth factor [TGF]-b, and Notch signaling) regulating PC function, PC interactions with adjacent cells, and PC differentiation from hiPSCs are also discussed. Specifically, PDGF-BB-platelet-derived growth factor receptor b signaling promotes PC cell survival, TGF-b signal transduction facilitates PC attachment to endothelial cells, and Notch signaling is critical in vascular development and arterial-venous specification. Furthermore, current challenges facing the use of hiPSC-derived PCs are discussed, and their ongoing uses in neurodegenerative disease modeling are identified. Further investigations into PCs and surrounding cell interactions are needed to characterize the roles of brain PCs in various neurodegenerative disorders.