Induced pluripotent stem cells (iPSC) are derived from reprogrammed adult somatic cells. These adult cells are manipulated in vitro to express genes and factors essential for acquiring and maintaining embryonic stem cell (ESC) properties. This technology is widely applied in many fields, and there has been much attention to developing iPSC-based disease models to validate drug discovery platforms and study pathophysiological molecular processes underlying disease onset. Especially in neurological diseases, there is a great need for iPSC-based technological research, as these cells can be obtained from each patient and carry the individual’s bulk of genetic mutations and properties. Moreover, iPSC can differentiate into multiple cell types. These are essential characteristics since the study of neurological diseases is affected by limited access to injured sites, in vitro models composed of various cell types, the complexity of reproducing the brain’s anatomy, ethical issues, and the fact that post-mortem cell culture is challenging. Neurodegenerative diseases enormously impact global health due to their high incidence, symptoms severity, and usually lack of effective therapies. Recently, analyses using disease-specific iPSC-based models confirmed their efficacy for testing multiple drugs. This review summarizes the advances in iPSC technology used in disease modeling and drug testing with a primary focus on neurodegenerative diseases, including Parkinson’s and Alzheimer’s diseases.