The etiology of neuropsychiatric disorders, such as schizophrenia and bipolar disorder, usually involves complex combinations of genetic defects/variations and environmental impacts, which hindered, for a long time, research efforts based on animal models and patients' non-neuronal cells or post-mortem tissues. However, the development of human induced pluripotent stem cell (iPSC) technology by the Yamanaka group was immediately applied to establish cell research models for neuronal disorders. Since then, techniques to achieve highly efficient differentiation of different types of neural cells following iPSC modeling have made much progress. The fast-growing iPSC and neural differentiation techniques have brought valuable insights into the pathology and neurobiology of neuropsychiatric disorders. In this article, we first review the application of iPSC technology in modeling neuronal disorders and discuss the progress in the accompanying neural differentiation. Then, we summarize the progress in iPSC-based research that has been accomplished so far regarding schizophrenia and bipolar disorder.