Astrocytes are essential for the formation and maintenance of neural networks through metabolic support, facilitation of synaptic function, and optimization of electrophysiological activity. However, a major technical challenge for investigating astrocyte function and disease-related pathophysiology has been the limited ability to obtain functional human astrocytes. Here we present a novel method to efficiently differentiate human pluripotent stem cell (hPSC)-derived neural progenitors to functional astrocytes in 28 days using a culture medium containing leukemia inhibitory factor (LIF) and bone morphogenetic protein 4 (BMP4). This approach yields highly pure populations of astrocytes expressing canonical astrocyte markers, which we confirmed by immunofluorescence, flow cytometry and RNA sequencing. Human PSC-derived astrocytes efficiently buffer glutamate and robustly support neural network activity. Co-cultures of hPSC-derived astrocytes and neurons on multi-electrode arrays generated robust network activity within 2 days and synchronous network bursts after 6 days. Whole cell patch-clamp recordings revealed an increased frequency of postsynaptic currents in human hPSC-derived neurons co-cultured with hPSC-derived versus primary rodent astrocytes, consistent with a corresponding increase in synapse density. Furthermore, hPSC-derived astrocytes retained their hominid morphology when transplanted into a mouse brain. In conclusion, we present a novel protocol to obtain functional astrocytes from human pluripotent stem cells, providing a platform for investigating human astrocyte function and neuronal-glial interactions.