Leydig cells (LCs) play crucial roles in producing testosterone, which is critical in the regulation of male reproduction and development. Low levels of testosterone will lead to male hypogonadism. LC transplantation is a promising alternative therapy for male hypogonadism. However, the source of LCs limits this strategy for clinical applications. Thus far, others have reported that LCs can be derived from stem cells by gene transfection, but the safe and effective induction method has not yet been reported. Here, we report that Leydig-like cells can be derived from human induced pluripotent stem cells (iPSCs) using a novel differentiation protocol based on molecular compounds. The iPSCs-derived Leydig-like cells (iPSC-LCs) acquired testosterone synthesis capabilities, had the similar gene expression profiles with LCs, and positively expressed Leydig cell lineage-specific protein markers LHCGR, STAR, SCARB1, SF-1, CYP11A1, HSD3B1, and HSD17B3 as well as negatively expressed iPSC-specific markers NANOG, OCT4, and SOX2. When iPSC-LCs labeled with lipophilic red dye (PKH26) were transplanted into rat testes that were selectively eliminated endogenous LCs using EDS (75 mg/kg), the transplanted iPSC-LCs could survive and function in the interstitium of testes, and accelerate the recovery of serum testosterone levels and testis weights. Collectively, these findings demonstrated that the iPSCs were able to be differentiated into Leydig-like cells by few defined molecular compounds, which may lay the safer groundwork for further clinical application of iPSC-LCs for hypogonadism.