Myotonic dystrophy type 1 (DM1) is caused by expanded Cytosine-Thymine-Guanine (CTG) repeats in the 3'-untranslated region (3' UTR) of the Dystrophia myotonica protein kinase (DMPK) gene, for which there is no effective therapy. The objective of this study is to develop genome therapy in human DM1 induced pluripotent stem (iPS) cells to eliminate mutant transcripts and reverse the phenotypes for developing autologous stem cell therapy. The general approach involves targeted insertion of polyA signals (PASs) upstream of DMPK CTG repeats, which will lead to premature termination of transcription and elimination of toxic mutant transcripts. Insertion of PASs was mediated by homologous recombination triggered by site-specific transcription activator-like effector nuclease (TALEN)-induced double-strand break. We found genome-treated DM1 iPS cells continue to maintain pluripotency. The insertion of PASs led to elimination of mutant transcripts and complete disappearance of nuclear RNA foci and reversal of aberrant splicing in linear-differentiated neural stem cells, cardiomyocytes, and teratoma tissues. In conclusion, genome therapy by insertion of PASs upstream of the expanded DMPK CTG repeats prevented the production of toxic mutant transcripts and reversal of phenotypes in DM1 iPS cells and their progeny. These genetically-treated iPS cells will have broad clinical application in developing autologous stem cell therapy for DM1.