We report that the efficiency of reprogramming human somatic cells to induced pluripotent stem cells (hiPSCs) can be dramatically improved in a microfluidic environment. Microliter-volume confinement resulted in a 50-fold increase in efficiency over traditional reprogramming by delivery of synthetic mRNAs encoding transcription factors. In these small volumes, extracellular components of the TGF-β and other signaling pathways exhibited temporal regulation that appears critical to acquisition of pluripotency. The high quality and purity of the resulting hiPSCs (μ-hiPSCs) allowed direct differentiation into functional hepatocyte- and cardiomyocyte-like cells in the same platform without additional expansion.