Pluripotent stem cells (PSCs) hold great promise for research and treatment of hemoglobinopathies. In principle, patient-specific induced pluripotent stem cells could be derived from a blood sample, genetically corrected to repair the disease-causing mutation, differentiated into hematopoietic stem cells (HSCs), and returned to the patient to provide a cure through autologous gene and cell therapy. However, there are many challenges at each step of this complex treatment paradigm. Gene repair is currently inefficient in stem cells, but use of zinc finger nucleases and transcription activator-like effector nucleases appear to be a major advance. To date, no successful protocol exists for differentiating PSCs into definitive HSCs. PSCs can be directly differentiated into primitive red blood cells, but not yet in sufficient numbers to enable treating patients, and the cost of clinical scale differentiation is prohibitively expensive with current differentiation methods and efficiencies. Here we review the progress, promise, and remaining hurdles in realizing the potential of PSCs for cell therapy.