The ability to generate spiral ganglion neurons (SGNs) from stem cells is a necessary prerequisite for development of cell-replacement therapies for sensorineural hearing loss. We present a protocol that directs human embryonic stem cells (hESCs) toward a purified population of otic neuronal progenitors (ONPs) and SGN-like cells. Between 82% and 95% of these cells express SGN molecular markers, they preferentially extend neurites to the cochlear nucleus rather than nonauditory nuclei, and they generate action potentials. The protocol follows an in vitro stepwise recapitulation of developmental events inherent to normal differentiation of hESCs into SGNs, resulting in efficient sequential generation of nonneuronal ectoderm, preplacodal ectoderm, early prosensory ONPs, late ONPs, and cells with cellular and molecular characteristics of human SGNs. We thus describe the sequential signaling pathways that generate the early and later lineage species in the human SGN lineage, thereby better describing key developmental processes. The results indicate that our protocol generates cells that closely replicate the phenotypic characteristics of human SGNs, advancing the process of guiding hESCs to states serving inner-ear cell-replacement therapies and possible next-generation hybrid auditory prostheses. © Stem Cells Translational Medicine  2017;6:923–936