Obtaining fully functional cell types is a major challenge for drug discovery and regenerative medicine. Currently, a fundamental solution to this key problem is still lacking. Here, we show that functional human induced hepatocytes (hiHeps) can be generated from fibroblasts by overexpressing the hepatic fate conversion factors HNF1A, HNF4A, and HNF6 along with the maturation factors ATF5, PROX1, and CEBPA. hiHeps express a spectrum of phase I and II drug-metabolizing enzymes and phase III drug transporters. Importantly, the metabolic activities of CYP3A4, CYP1A2, CYP2B6, CYP2C9, and CYP2C19 are comparable between hiHeps and freshly isolated primary human hepatocytes. Transplanted hiHeps repopulate up to 30% of the livers of Tet-uPA/Rag2^−/−/γc^−/− mice and secrete more than 300 μg/ml human ALBUMIN in vivo. Our data demonstrate that human hepatocytes with drug metabolic function can be generated by lineage reprogramming, thus providing a cell resource for pharmaceutical applications.