The hypothalamus is the central regulator of systemic energy homeostasis, and its dysfunction can result in extreme body weight alterations. Insights into the complex cellular physiology of this region are critical to the understanding of obesity pathogenesis; however, human hypothalamic cells are largely inaccessible for direct study. Here, we developed a protocol for efficient generation of hypothalamic neurons from human embryonic stem cells (ESCs) and induced pluripotent stem cells (iPSCs) obtained from patients with monogenetic forms of obesity. Combined early activation of sonic hedgehog signaling followed by timed NOTCH inhibition in human ESCs/iPSCs resulted in efficient conversion into hypothalamic NKX2.1+ precursors. Application of a NOTCH inhibitor and brain-derived neurotrophic factor (BDNF) further directed the cells into arcuate nucleus hypothalamic-like neurons that express hypothalamic neuron markers proopiomelanocortin (POMC), neuropeptide Y (NPY), agouti-related peptide (AGRP), somatostatin, and dopamine. These hypothalamic-like neurons accounted for over 90% of differentiated cells and exhibited transcriptional profiles defined by a hypothalamic-specific gene expression signature that lacked pituitary markers. Importantly, these cells displayed hypothalamic neuron characteristics, including production and secretion of neuropeptides and increased p-AKT and p-STAT3 in response to insulin and leptin. Our results suggest that these hypothalamic-like neurons have potential for further investigation of the neurophysiology of body weight regulation and evaluation of therapeutic targets for obesity.