Induced pluripotent stem (iPS) cells are of potential value not only for regenerative medicine, but also for disease investigation. The present study describes the development of a neutrophil differentiation system from human iPS cells (hiPSCs) and the analysis of neutrophil function and differentiation. The culture system used consisted of the transfer of hiPSCs onto OP9 cells and their culture with vascular endothelial growth factor (VEGF). After 10 days, TRA 1-85(+)CD34(+)VEGF receptor-2 (VEGFR-2)(high) cells were sorted and co-cultured with OP9 cells in the presence of hematopoietic cytokines for 30 days. Floating cells were collected and subjected to morphological and functional analysis. These hiPSC-derived neutrophils were similar to peripheral blood mature neutrophils in morphology, contained functional neutrophil specific granules, and were equipped with the basic functions such as phagocytosis, superoxide production, and chemotaxis. In the process of differentiation, myeloid cells appeared sequentially from immature myeloblasts to mature segmented neutrophils. Expression patterns of surface antigen, transcription factors, and granule proteins during differentiation were also similar to those of granulopoiesis in normal bone marrow. In conclusion, differentiation of mature neutrophils from hiPSCs was successfully induced in a similar process to normal granulopoiesis using an OP9 co-culture system. This system may be applied to elucidate the pathogenesis of various hematological diseases that affect neutrophils. J. Cell. Physiol. 226: 1283-1291, 2011. (C) 2010 Wiley-Liss, Inc.