Human induced pluripotent stem (iPS) cell-derived intestinal organoids have low invasiveness; however, the current differentiation method does not reflect the crypt-villus-like structure due to structural immaturity. Here, we generated budding-like organoids that formed epithelial tissue-like structures and had the characteristics of the mature small intestine from human iPS cells. They showed a high expression of drug transporters and induced the expression of cytochrome P450 3A4 and P-glycoprotein. When treated with tumor necrosis factor-α and/or transforming growth factor-β, the budding-like organoids replicated the pathogenesis of mucosal damage or intestinal fibrosis. Upon dissociation and seeding on cell culture inserts, the organoids retained intestinal characteristics, forming polarized intestinal folds with approximately 400 Ω × cm2 transepithelial electrical resistance. This novel method has great potential for disease modeling and drug screening applications.