The study of neurodegenerative diseases using pluripotent stem cells requires new methods to assess neurodevelopment and neurodegeneration of specific neuronal subtypes. The cholinergic system, characterized by its use of the neurotransmitter acetylcholine, is one of the first to degenerate in Alzheimer’s disease and is also affected in frontotemporal dementia. We developed a differentiation protocol to generate basal forebrain cholinergic neurons (BFCNs) from induced pluripotent stem cells (iPSCs) aided by the use of small molecule inhibitors and growth factors. Ten iPSC lines were successfully differentiated into BFCNs using this protocol. The neuronal cultures were characterised through RNA and protein expression, and functional analysis of neurons was confirmed by whole-cell patch clamp. We have developed a reliable protocol using only small molecule inhibitors and growth factors, while avoiding transfection or cell sorting methods, to achieve a BFCN culture that expresses the characteristic markers of cholinergic neurons.