Representative in vitro blood-brain barrier (BBB) models can support the development of strategies to efficiently deliver therapeutic drugs to the brain by aiding the characterization of their internalization, trafficking, and subsequent transport across the BBB. A collagen type I (COL1) hydrogel-based in vitro BBB model was developed to enable the simultaneous characterization of drug transport and intracellular processing using confocal microscopy, in a way that traditional insert-based in vitro BBB models cannot. Human induced pluripotent stem cells (hiPSCs) were differentiated into cells that exhibited a BBB-like phenotype on COL1 hydrogels, which included the expression of key BBB-specific proteins and low permeability of representative small and large molecule therapeutics. Furthermore, the BBB phenotype observed on the COL1 hydrogel was similar to that previously reported on porous inserts. The intracellular visualization of two small molecule efflux pump substrates within the hiPSC-derived BBB-like cells demonstrated a difference in cytosolic and vesicular accumulation, which complemented permeability measurements demonstrating a difference in transport rate. The easy-to-construct COL1-based hiPSC-derived BBB model presented here is the first in vitro two-dimensional BBB experimental system that enables the simultaneous quantification of cellular permeability and visualization of intracellular processes by utilizing confocal microscopy, which can provide insights regarding the relationship between transport and intracellular trafficking of therapeutic drugs.