Alzheimer's disease (AD) is the most common form of dementia. To date, only five pharmacological agents have been approved by the Food and Drug Administration for clinical use in AD, all of which target the symptoms of the disease rather than the cause. Increasing our understanding of the underlying pathophysiology of AD will facilitate the development of new therapeutic strategies. Over the years, the major hypotheses of AD etiology have focused on deposition of amyloid beta and mitochondrial dysfunction. In this review we highlight the potential of experimental model systems based on human induced pluripotent stem cells (iPSCs) to provide novel insights into the cellular pathophysiology underlying neurodegeneration in AD. Whilst Down syndrome and familial AD iPSC models faithfully reproduce features of AD such as accumulation of Aβ and tau, oxidative stress and mitochondrial dysfunction, sporadic AD is much more difficult to model in this way due to its complex etiology. Nevertheless, iPSC-based modelling of AD has provided invaluable insights into the underlying pathophysiology of the disease, and has a huge potential for use as a platform for drug discovery.