A homozygous mutation in the inositol monophosphatase 1 (IMPA1) gene was recently identified in nine individuals with severe intellectual disability (ID) and disruptive behavior. These individuals belong to the same family from Northeastern Brazil, which has 28 consanguineous marriages and 59 genotyped family members. IMPA1 is responsible for the generation of free inositol from de novo biosynthesis and recycling from inositol polyphosphates and participates in the phosphatidylinositol signaling pathway. To understand the role of IMPA1 deficiency in ID, we generated induced pluripotent stem cells (iPSCs) from patients and neurotypical controls and differentiated these into hippocampal dentate gyrus-like neurons and astrocytes. IMPA1-deficient neuronal progenitor cells (NPCs) revealed substantial deficits in proliferation and neurogenic potential. At low passage NPCs (P1 to P3), we observed cell cycle arrest, apoptosis, progressive change to a glial morphology and reduction in neuronal differentiation. These observations were validated by rescuing the phenotype with myo-inositol supplemented media during differentiation of patient-derived iPSCs into neurons and by the reduction of neurogenic potential in control NPCs-expressing shIMPA1. Transcriptome analysis showed that NPCs and neurons derived from ID patients have extensive deregulation of gene expression affecting pathways necessary for neurogenesis and upregulation of gliogenic genes. IMPA1 deficiency did not affect cell cycle progression or survival in iPSCs and glial progenitor cells or astrocyte differentiation. Therefore, this study shows that the IMPA1 mutation specifically affects NPC survival and neuronal differentiation.