Successful development of effective therapeutics for Alzheimer’s disease (AD) requires a deep understanding of the mechanisms of disease pathogenesis. Recent human induced pluripotent stem cell (hiPSC)-derived models have shown it is possible to recapitulate the complex genetic diversity of a patient and more completely model AD pathology. While most work has focused on neuronal AD phenotypes, there is mounting evidence that failure to regulate cholesterol homeostasis by neighboring nonneuronal support cells may be involved in AD pathogenesis. Amyloid precursor protein (APP) or multiple fragments generated by APP proteolytic processing have previously been implicated in the regulation of cholesterol metabolism. However, the physiological function of APP in regulating lipoprotein homeostasis in astrocytes, which are responsible for the brain’s de novo cholesterol biosynthesis and regulation, remains unclear. To address this, we independently validated and characterized a novel in vitro differentiation protocol to generate human astrocytes from hiPSC. We found that cells derived by this method recapitulated native astrocytes in their form and function. We also utilized CRISPR/Cas9 genome editing to generate isogenic APP knockout (KO) hiPSCs. We found that APP KO astrocytes have reduced cholesterol, elevated levels of sterol regulatory element-binding protein (SREBP)-target gene transcripts, and increased low-density lipoprotein (LDL) receptor protein, all downstream consequences of reduced lipoprotein endocytosis. To elucidate which APP fragments regulate cholesterol homeostasis and examine whether familial AD mutations in APP affect lipoprotein metabolism, we analyzed an isogenic allelic series using the APP Swedish and APP V717F mutations. Only astrocytes homozygous for the APP Swedish (APPSwe/Swe) mutation, which had reduced full-length APP (FL APP) due to aggressive beta-secretase cleavage, recapitulated the APP KO phenotypes. Further, astrocytic internalization of amyloid-beta (A-beta), another ligand of LDL receptors, was impaired in APP KO and APPSwe/Swe astrocytes. Given that FL APP is known to bind to multiple LDL receptors, we propose that FL APP acts as a co-receptor for known LDL receptor ligands and is required for proper cholesterol homeostasis and A-beta clearance in human astrocytes.