Induced pluripotent stem cells and embryonic stem cells have revolutionized cellular neuroscience, providing the opportunity to model neurological diseases and test potential therapeutics in a pre-clinical setting. The power of these models has been widely discussed, but the potential pitfalls of stem cell differentiation in this research are less well described. We have analyzed the literature that describes differentiation of human pluripotent stem cells into three neural cell types that are commonly used to study diseases, including forebrain cholinergic neurons for Alzheimer’s disease, midbrain dopaminergic neurons for Parkinson’s disease and cortical astrocytes for neurodegenerative and psychiatric disorders. Published protocols for differentiation vary widely in the reported efficiency of target cell generation. Additionally, characterization of the cells by expression profile and functionality differs between studies and is often insufficient, leading to highly variable protocol outcomes. We have synthesized this information into a simple methodology that can be followed when performing or assessing differentiation techniques. Finally we propose three considerations for future research, including the use of physiological O2 conditions, three-dimensional co-culture systems and microfluidics to control feeding cycles and growth factor gradients. Following these guidelines will help researchers to ensure that robust and meaningful data is generated, enabling the full potential of stem cell differentiation for disease modeling and regenerative medicine.