Mutations in C9orf72 are the most common genetic cause of amyotrophic lateral sclerosis (ALS). Accumulating evidence implicates astrocytes as important non‐cell autonomous contributors to ALS pathogenesis, although the potential deleterious effects of astrocytes on the function of motor neurons remains to be determined in a completely humanized model of C9orf72‐mediated ALS. Here, we use a human iPSC‐based model to study the cell autonomous and non‐autonomous consequences of mutant C9orf72 expression by astrocytes. We show that mutant astrocytes both recapitulate key aspects of C9orf72‐related ALS pathology and, upon co‐culture, cause motor neurons to undergo a progressive loss of action potential output due to decreases in the magnitude of voltage‐activated Na+ and K+ currents. Importantly, CRISPR/Cas‐9 mediated excision of the C9orf72 repeat expansion reverses these phenotypes, confirming that the C9orf72 mutation is responsible for both cell‐autonomous astrocyte pathology and non‐cell autonomous motor neuron pathophysiology.