Abstract Clinical and preclinical research has demonstrated that iPSC-derived NK (iNK) cells have a high therapeutic potential, yet poor understanding of the detailed process of their differentiation in vitro and their counterpart cell development in vivo has hindered therapeutic iNK cell production and engineering. Here we dissect the crucial differentiation of both fetal liver NK cells and iNK cells to enable the rational design of advanced iNK production protocols. We use a comparative analysis of single-cell RNA-seq (scRNA-seq) to pinpoint key factors lacking in the induced setting which we hypothesized would hinder iNK differentiation and/ or functionality. By analyzing key transcription factor regulatory networks, we discovered the importance of TBX21, EOMES, and STAT5A in the differentiation timeline. This analysis provides a blueprint for further engineering new iPSC lines to obtain iNK cells with enhanced functions. We validated this approach by creating a new line of STAT5A-iPSCs which can be differentiated to STAT5A-expressing macrophages with both NK cell and macrophage features such as perforin production, phagocytosis, and anti-tumor functions.