The discovery of human induced pluripotent stem cells (iPSCs) has provided a model system for studying early events during human development. Developmentally melanocytes originate from migratory neural crest cells that emerge from the neural plate during embryogenesis after a complex process of differentiation, proliferation, and migration out of the neural tube along defined pathways. In the adult, human melanocytes are located in the basal layer of the epidermis, hair follicles, uvea, inner ear, and meninges. In the epidermis, melanocytes produce melanin pigment that gives color to the skin as well as providing protection from ultraviolet light damage. In addition, melanocytes transfer melanin pigment to hair matrix keratinocytes during each hair cycle to maintain hair pigmentation. Characterization of mouse melanocyte stem cells (MELSCs) is more complete than for humans. MELSCs are located in the bulge region of hair follicles, where hair follicle stem cells (HFSCs) also reside. Recently, it has been demonstrated that HFSCs provide a functional nice for MELSCs. According to current cancer stem cell theory, melanomas are considered to evolve from MELSCs, although the exact mechanism remains to be elucidated fully. In humans, importantly, the lack of more specific markers of MELSCs, current understanding of the molecular regulations of melanocyte development remains incomplete. Recently, the generation of melanocytes from iPSCs has lead to some clarification of human melanocyte development in vitro. Utilization of iPSC-derived melanocytes may prove invaluable in further study of human melanocytic development and novel therapies for patients suffering with pigmentation disorders and melanoma.