Human cellular models of neurodegeneration require reproducibility and longevity, which is necessary for simulating age-dependent diseases. Such systems are particularly needed for TDP-43 proteinopathies1, which involve human-specific mechanisms2,3,4,5 that cannot be directly studied in animal models. Here, to explore the emergence and consequences of TDP-43 pathologies, we generated induced pluripotent stem cell-derived, colony morphology neural stem cells (iCoMoNSCs) via manual selection of neural precursors6. Single-cell transcriptomics and comparison to independent neural stem cells7 showed that iCoMoNSCs are uniquely homogenous and self-renewing. Differentiated iCoMoNSCs formed a self-organized multicellular system consisting of synaptically connected and electrophysiologically active neurons, which matured into long-lived functional networks (which we designate iNets). Neuronal and glial maturation in iNets was similar to that of cortical organoids8. Overexpression of wild-type TDP-43 in a minority of neurons within iNets led to progressive fragmentation and aggregation of the protein, resulting in a partial loss of function and neurotoxicity. Single-cell transcriptomics revealed a novel set of misregulated RNA targets in TDP-43-overexpressing neurons and in patients with TDP-43 proteinopathies exhibiting a loss of nuclear TDP-43. The strongest misregulated target encoded the synaptic protein NPTX2, the levels of which are controlled by TDP-43 binding on its 3′ untranslated region. When NPTX2 was overexpressed in iNets, it exhibited neurotoxicity, whereas correcting NPTX2 misregulation partially rescued neurons from TDP-43-induced neurodegeneration. Notably, NPTX2 was consistently misaccumulated in neurons from patients with amyotrophic lateral sclerosis and frontotemporal lobar degeneration with TDP-43 pathology. Our work directly links TDP-43 misregulation and NPTX2 accumulation, thereby revealing a TDP-43-dependent pathway of neurotoxicity.