BACKGROUND: Induced pluripotent stem cells induced hepatocytes (iHeps) are widely used in modeling human liver diseases and as a potential cell source for replacement therapy. However, most iHeps are relatively immature and challenging to maintain for long-term in vitro culture. METHODS: We optimized the differentiation protocol by addition of a combination of small molecules to inhibit epithelial-mesenchymal transition (EMT) in iHeps (iHeps EMTi), and further characterized their function both in vitro and in vivo analyses. RESULTS: Inhibition of EMT extended the in vitro culture period of iHeps EMTi from day 24 to day 60. In vitro analysis revealed that, compared to control, iHeps EMTi exhibited significantly higher expression levels of hepatic functional markers and enhanced hepatocyte functions, including lipid accumulation, glycogen storage, albumin secretion, and urea acid metabolism. Moreover, the molecular profiles of iHeps EMTi are closer to those of primary human hepatocytes. In addition, the in vivo engraftment efficiency of iHeps EMTi in the chimeric mice model was also improved as compared to iHeps alone. CONCLUSIONS: We established a robust protocol to generate human iHeps with improved function and capable of long-term in vitro culturing via the suppression of EMT. Moreover, those iHeps with EMT suppression have improved engraftment in human chimeric mice.