Liver organoids derived from human pluripotent stem cells (PSCs) represent a new type of in vitro liver model for understanding organ development, disease mechanism and drug testing. However, engineering liver organoids with favorable functions in a controlled cellular microenvironment remains challenging. In this work, we present a new strategy for engineering liver organoids derived from human induced PSCs (hiPSCs) in a 3D perfusable chip system by combining stem cell biology with microengineering technology. This approach enabled formation of hiPSC-based embryoid bodies (EBs), in situ hepatic differentiation, long-term 3D culture and generation of liver organoids in a perfusable micropillar chip. The generated liver organoids exhibited favorable growth and differentiation of hepatocytes and cholangiocytes, recapitulating the key features of human liver formation with cellular heterogeneity. The liver organoids in perfused cultures displayed improved cell viability and higher expression of endodermal genes (SOX17 and FOXA2) and mature hepatic genes (ALB and CYP3A4) under perfused culture conditions. In addition, the liver organoids showed a marked enhancement of hepatic-specific functions, including albumin and urea production and metabolic capabilities, indicating the role of mechanical fluid flow in promoting the functions of the liver organoids. Moreover, the liver organoids exhibited hepatotoxic response after exposure to acetaminophen (APAP) in a dose- and time-dependent manner. The established liver organoid-on-a-chip system may provide a promising platform for engineering stem cell-based organoids with applications in regenerative medicine, disease modeling and drug testing.