Familial dysautonomia (FD) is a debilitating disorder that affects derivatives of the neural crest (NC). For unknown reasons, people with FD show marked differences in disease severity despite carrying an identical, homozygous point mutation in IKBKAP, encoding IκB kinase complex-associated protein. Here we present disease-related phenotypes in human pluripotent stem cells (PSCs) that capture FD severity. Cells from individuals with severe but not mild disease show impaired specification of NC derivatives, including autonomic and sensory neurons. In contrast, cells from individuals with severe and mild FD show defects in peripheral neuron survival, indicating that neurodegeneration is the main culprit for cases of mild FD. Although genetic repair of the FD-associated mutation reversed early developmental NC defects, sensory neuron specification was not restored, indicating that other factors may contribute to disease severity. Whole-exome sequencing identified candidate modifier genes for individuals with severe FD. Our study demonstrates that PSC-based modeling is sensitive in recapitulating disease severity, which presents an important step toward personalized medicine.