Astrocyte reactivation has been discovered to be an important contributor to several neurological diseases. In vitro models involving human astrocytes have the potential to reveal disease-specific mechanisms of these cells and to advance research on neuropathological conditions. Here, we induced a reactive phenotype in human induced pluripotent stem cell (hiPSC)-derived astrocytes and studied the inflammatory natures and effects of these cells on human neurons. Astrocytes responded to interleukin-1β (IL-1β) and tumor necrosis factor-α (TNF-α) treatment with a typical transition to polygonal morphology and a shift to an inflammatory phenotype characterized by altered gene and protein expression profiles. Astrocyte-secreted factors did not exert neurotoxic effects, whereas they transiently promoted the functional activity of neurons. Importantly, we engineered a novel microfluidic platform designed for investigating interactions between neuronal axons and reactive astrocytes that also enables the implementation of a controlled inflammatory environment. In this platform, selective stimulation of astrocytes resulted in an inflammatory niche that sustained axonal growth, further suggesting that treatment induces a reactive astrocyte phenotype with neurosupportive characteristics. Our findings show that hiPSC-derived astrocytes are suitable for modeling astrogliosis, and the developed in vitro platform provides promising novel tools for studying neuron-astrocyte crosstalk and human brain disease in a dish.