Lysosomes are organelles involved in the degradation and recycling of macromolecules, and play a critical role in sensing metabolic information in the cell. A class of rare metabolic diseases called lysosomal storage disorders (LSD) are characterized by lysosomal dysfunction and the accumulation of macromolecular substrates. The central nervous system appears to be particularly vulnerable to lysosomal dysfunction, since many LSDs are characterized by severe, widespread neurodegeneration with pediatric onset. Furthermore, variants in lysosomal genes are strongly associated with some common neurodegenerative disorders such as Parkinson's disease (PD). To better understand disease pathology and develop novel treatment strategies, it is critical to study the fundamental molecular disease mechanisms in the affected cell types that harbor endogenously expressed mutations. The discovery of methods for reprogramming of patient-derived somatic cells into induced pluripotent stem cells (iPSCs), and their differentiation into distinct neuronal and glial cell types, have provided novel opportunities to study mechanisms of lysosomal dysfunction within the relevant, vulnerable cell types. These models also expand our ability to develop and test novel therapeutic targets. We discuss recently developed methods for iPSC differentiation into distinct neuronal and glial cell types, while addressing the need for meticulous experimental techniques and parameters that are essential to accurately identify inherent cellular pathologies. iPSC models for neuronopathic LSDs and their relationship to sporadic age-related neurodegeneration are also discussed. These models should facilitate the discovery and development of personalized therapies in the future.