Forebrain γ-aminobutyric acid (GABA) interneurons have crucial roles in high-order brain function via modulating network activities and plasticity, and they are implicated in many psychiatric disorders. Availability of enriched functional human forebrain GABA interneurons, especially those from people affected by GABA interneuron deficit disease, will be instrumental to the investigation of disease pathogenesis and development of therapeutics. We describe a protocol for directed differentiation of forebrain GABA interneurons from human embryonic stem cells (ESCs) and induced pluripotent stem cells (iPSCs) in a chemically defined system. In this protocol, human PSCs are first induced to primitive neuroepithelial cells over 10 d, and then patterned to NKX2.1-expressing medial ganglionic eminence progenitors by simple treatment with sonic hedgehog or its agonist purmorphamine over the next 2 weeks. These progenitors generate a nearly pure population of forebrain GABA interneurons by the sixth week. This simple and efficient protocol does not require transgenic modification or cell sorting, and it has been replicated with multiple human ESC and iPSC lines.