SORL1 is implicated in the pathogenesis of Alzheimer’s disease (AD) through genetic studies. To interrogate the roles of SORL1 in human brain cells, SORL1-null induced pluripotent stem cells (iPSCs) were differentiated to neuron, astrocyte, microglial, and endothelial cell fates. Loss of SORL1 leads to alterations in both overlapping and distinct pathways across cell types, with the greatest effects in neurons and astrocytes. SORL1 loss induces a neuron-specific reduction in apolipoprotein E (APOE) and clusterin (CLU) and altered lipid profiles. Analyses of iPSCs derived from a large cohort reveal a neuron-specific association between SORL1, APOE, and CLU levels, a finding validated in postmortem brain. Enhancement of retromer-mediated trafficking rescues tau phenotypes observed in SORL1-null neurons but does not rescue APOE levels. Pathway analyses implicate transforming growth factor β (TGF-β)/SMAD signaling in SORL1 function, and modulating SMAD signaling in neurons alters APOE RNA levels in a SORL1-dependent manner. Taken together, these data provide a mechanistic link between strong genetic risk factors for AD.