The hypothalamus comprises neuronal clusters that are essential for body weight regulation and other physiological functions. Insights into the complex cellular physiology of this region of the brain are critical to understanding the pathogenesis of obesity, but human hypothalamic cells are largely inaccessible for direct study. Here we describe a technique for generation of arcuate-like hypothalamic neurons from human pluripotent stem (hPS) cells. Early activation of SHH signaling and inhibition of BMP and TGFβ signaling, followed by timed inhibition of NOTCH, can efficiently differentiate hPS cells into NKX2.1+ hypothalamic progenitors. Subsequent incubation with BDNF induces the differentiation and maturation of pro-opiomelanocortin and neuropeptide Y neurons, which are major cell types in the arcuate hypothalamus. These neurons have molecular and cellular characteristics consistent with arcuate neurons. © 2016 by John Wiley & Sons, Inc.