The use of human induced pluripotent stem (iPS) cells would be of great value for a variety of applications involving drug development studies. Several reports have been published on the differentiation of human iPS cells into hepatocyte-like cells; however, the cells were insufficient for application in drug metabolism studies. In this study, we aimed to establish effective methods for differentiation of human iPS cells into hepatocytes. Two human iPS cell lines were differentiated by addition of activin A, dimethyl sulfoxide, hepatocyte growth factor, oncostatin M, and dexamethasone. The differentiated cells expressed hepatocyte markers and drug-metabolizing enzymes, revealing that the human iPS cells were differentiated into hepatocyte-like cells. Expression of CYP3A4 and UGT1A1 mRNAs increased with treatment with typical inducers of the enzymes, and the response of the cells against the inducers was similar to that of human hepatocytes. Furthermore, the drug-metabolizing activity of CYP3A4, as monitored by testosterone 6β-hydroxylase activity, was elevated by these inducers. In conclusion, we established methods for differentiation of hepatocyte-like cells expressing drug metabolizing activity from human iPS cells. The hepatocyte-like cells derived from human iPS cells will be useful for drug metabolism studies.