Induced pluripotent stem cells (iPSCs) are valuable in disease modeling because of their potential to expand and differentiate into virtually any cell type and recapitulate key aspects of human biology. Functional genomics are genome-wide studies that aim to discover genotype-phenotype relationships, thereby revealing the impact of human genetic diversity on normal and pathophysiology. In this review, we make the case that human iPSCs (hiPSCs) are a powerful tool for functional genomics, since they provide an in vitro platform for the study of population genetics. We describe cutting-edge tools and strategies now available to researchers, including multi-omics technologies, advances in hiPSC culture techniques, and innovations in drug development. Functional genomics approaches based on hiPSCs hold great promise for advancing drug discovery, disease etiology, and the impact of genetic variation on human biology.