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Astrocytes are vital components in neuronal circuitry and there is increasing evidence linking the dysfunction of these cells to a number of central nervous system diseases. Studying the role of these cells in human brain function in the past has been difficult due to the limited access to human brain. Here, human-induced pluripotent stem cells (hiPSCs) were differentiated into astrospheres using a hybrid plating method, with or without dual-SMAD inhibition, and assessed in astrocytic markers, calcium-transient signaling, reactive oxygen species (ROS) production, and immune response. Neural degeneration was modeled via stimulation with amyloid-β (Aβ) 42 oligomers. Finally, co-culture was performed to for the derived astrospheres with isogenic neurospheres. Results show that the derived glial cells expressed astrocyte markers, secreted extracellular matrix (ECM) and capable of responding to with Aβ42 stimulation (higher oxidative stress, higher TNF-α and IL-6 expression, upon stimulation). In addition, the ECM remodeling proteins MMP2 and MMP3 were downregulated with Aβ42 stimulation. Co-culture experiments show the enhanced synaptic activities of neurons co-culture and neural protection ability of the glial cells. This study provides additional knowledge about the roles of brain glial cells, heterotypic cell-cell interactions, and the formation of engineered neuronal synapses in vitro. The implications lie in neurological disease modeling, drug screening, studying progression of neural degeneration and the role of stem cell microenvironment.