The developing dorsomedial telencephalon includes the medial pallium, which goes on to form the hippocampus. Generating a reliable source of human hippocampal tissue is an important step for cell-based research into hippocampus-related diseases. Here we show the generation of functional hippocampal granule- and pyramidal-like neurons from self-organizing dorsomedial telencephalic tissue using human embryonic stem cells (hESCs). First, we develop a hESC culture method that utilizes bone morphogenetic protein (BMP) and Wnt signalling to induce choroid plexus, the most dorsomedial portion of the telencephalon. Then, we find that titrating BMP and Wnt exposure allowed the self-organization of medial pallium tissues. Following long-term dissociation culture, these dorsomedial telencephalic tissues give rise to Zbtb20+/Prox1+ granule neurons and Zbtb20+/KA1+ pyramidal neurons, both of which were electrically functional with network formation. Thus, we have developed an in vitro model that recapitulates human hippocampus development, allowing the generation of functional hippocampal granule- and pyramidal-like neurons.