Advanced technologies are required for generating human intestinal epithelial cells (hIECs) harboring cellular diversity and functionalities to predict oral drug absorption in humans and study normal intestinal epithelial physiology. We developed a reproducible two-step protocol to induce human pluripotent stem cells to differentiate into highly expandable hIEC progenitors and a functional hIEC monolayer exhibiting intestinal molecular features, cell type diversity, and high activities of intestinal transporters and metabolic enzymes such as cytochrome P450 3A4 (CYP3A4). Functional hIECs are more suitable for predicting compounds metabolized by CYP3A4 and absorbed in the intestine than Caco-2 cells. This system is a step toward the transition from three-dimensional (3D) intestinal organoids to 2D hIEC monolayers without compromising cellular diversity and function. A physiologically relevant hIEC model offers a novel platform for creating patient-specific assays and support translational applications, thereby bridging the gap between 3D and 2D culture models of the intestine.