Induced pluripotent stem cells (iPSCs) can be differentiated into various cell types, including peripheral sensory neurons (SNs). In vivo SNs have distinctive hallmarks that differentiate them from other neurons, such as TTX-resistant currents and a pseudounipolar morphology. However, conventional small molecule-based in vitro differentiation typically yields immature neurons, requires adaptation for each iPSC-line and is prone to batch-to-batch variations. To overcome these hurdles, we engineered iPSCs to express NGN1, BRN3A and ISLET1 (NBI) in an inducible manner. Overexpression of NBI for seven days in iPSCs induces an early sensory neuron fate. After eight weeks of in vitro culture NBI SNs are electrophysiologically functional, show TTX-resistant currents in more than 70% of the neurons and can be used to model diseases, such as inherited eythromelalgia. However, NBI SNs typically do not recapitulate a pseudounipolar morphology. Recent findings indicate that SNs require contact to non-neuronal dorsal root ganglia (DRG) cells to transition into a pseudounipolar morphology in vitro. Indeed, more than 20% of the NBI SNs adopt a pseudounipolar morphology after three weeks of co-culture with non-neuronal cells from rat DRG. This approach facilitates generation of functional SNs with an authentic pseudounipolar morphology that should be suitable for fundamental and translational research.