Tissue-resident macrophages are key players in inflammatory processes, and their activation and functionality are crucial in health and disease. Numerous diseases are associated with alterations in homeostasis or dysregulation of the innate immune system, including allergic reactions, autoimmune diseases, and cancer. Macrophages are a prime target for drug discovery due to their major regulatory role in health and disease. Currently, the main sources of macrophages used for therapeutic compound screening are primary cells isolated from blood or tissue or immortalized or neoplastic cell lines (e.g., THP-1). Here, we describe an improved method to employ induced pluripotent stem cells (iPSCs) for the high-yield, large-scale production of cells resembling tissue-resident macrophages. For this, iPSC-derived macrophage-like cells are thoroughly characterized to confirm their cell identity and thus their suitability for drug screening purposes. These iPSC-derived macrophages show strong cellular identity with primary macrophages and recapitulate key functional characteristics, including cytokine release, phagocytosis, and chemotaxis. Furthermore, we demonstrate that genetic modifications can be readily introduced at the macrophage-like progenitor stage in order to interrogate drug target-relevant pathways. In summary, this novel method overcomes previous shortcomings with primary and leukemic cells and facilitates large-scale production of genetically modified iPSC-derived macrophages for drug screening applications.