Hepatocyte-like cells (HLCs) generated from human induced pluripotent stem cells (iPSCs) could provide an unlimited source of liver cells for regenerative medicine, disease modeling, drug screening, and toxicology studies. Here we describe a stepwise improved protocol that enables highly efficient, homogeneous, and reproducible differentiation of human iPSCs into functional hepatocytes through controlling all three stages of hepatocyte differentiation, starting from a single cell (non-colony) culture of iPSCs, through homogeneous definitive endoderm induction and highly efficient hepatic specification, and finally arriving at matured HLCs. The final population of cells exhibits morphology closely resembling that of primary human hepatocytes, and expresses specific hepatic markers as evidenced by immunocytochemical staining. More importantly, these HLCs demonstrate key functional characteristics of mature hepatocytes, including major serum protein (e.g., albumin, fibronectin, and alpha-1 antitrypsin) secretion, urea synthesis, glycogen storage, and inducible cytochrome P450 activity.