The use of induced pluripotent stem cells (iPSC) as models for development and human disease has enabled the study of otherwise inaccessible tissues. A remaining challenge in developing reliable models is our limited understanding of the factors driving irregular differentiation of iPSCs, particularly the impact of acquired somatic mutations. We leveraged data from a pooled dopaminergic neuron differentiation experiment of 238 iPSC lines profiled with single-cell RNA and whole-exome sequencing to study how somatic mutations affect differentiation outcomes. We found that deleterious somatic mutations in key developmental genes, notably the gene, are strongly associated with failure in dopaminergic neuron differentiation and a larger proliferation rate in culture. We further identified broad differences in cell type composition between incorrectly and successfully differentiating lines, as well as significant changes in gene expression contributing to the inhibition of neurogenesis. Our work calls for caution in interpreting differentiation-related phenotypes in disease-modeling experiments.