Alzheimer's disease (AD) is a leading cause of age-related dementia that is characterized by an extensive loss of neurons and synaptic transmission. The pathological hallmarks of AD are neurofibrillary tangles and deposition of β-amyloid (Aβ) plaques. Previous research has investigated how Aβ fragments disrupt synaptic mechanisms in the vulnerable regions of the brain. There is a tremendous potential for stem cell technology to extend upon this research, not only in terms of developing therapeutic applications, but also in modeling AD. Indeed, the advent of induced pluripotent stem cell technology has opened up exciting new avenues for generating patient and disease-specific cell lines from somatic cells that may be used to model AD. Amyloid precursor protein (APP) is a key protein in neuronal development and this article reviews the role of APP in AD. Stem cell technology offers the opportunity to make use of APP in the directed differentiation of induced pluripotent stem cells into functional neurons, a process that may help generate a model of AD and thereby facilitate an understanding of the mechanisms underlying this disease.