Age-related macular degeneration (AMD) is one of the major causes of blindness in aging population that progresses with death of retinal pigment epithelium (RPE) and photoreceptor degeneration inducing impairment of central vision. Discovery of human induced pluripotent stem (hiPS) cells has opened new avenues for the treatment of degenerative diseases using patient-specific stem cells to generate tissues and cells for autologous cell-based therapy. Recently, RPE cells were generated from hiPS cells. However, there is no evidence that those hiPS-derived RPE possess specific RPE functions that fully distinguish them from other types of cells. Here, we show for the first time that RPE generated from hiPS cells under defined conditions exhibit ion transport, membrane potential, polarized vascular endothelial growth factor secretion, and gene expression profile similar to those of native RPE. The hiPS-RPE could therefore be a very good candidate for RPE replacement therapy in AMD. However, these cells show rapid telomere shortening, DNA chromosomal damage, and increased p21 expression that cause cell growth arrest. This rapid senescence might affect the survival of the transplanted cells in vivo and therefore, only the very early passages should be used for regeneration therapies. Future research needs to focus on the generation of “safe” as well as viable hiPS-derived somatic cells.