Mutations in the gene Adenomatous Polyposis Coli or APC appear in most sporadic cases of colorectal cancer and it is the most frequent mutation causing hereditary Familial Adenomatous Polyposis. The detailed molecular mechanism by which APC mutations predispose to the development of colorectal cancer is not completely understood. This is in part due to the lack of accessibility to appropriate models that recapitulate the early events associated with APC mediated intestinal transformation. We have established a novel platform utilizing human induced Pluripotent Stem cells or iPSC from normal or FAP-specific APC mutant individuals and evaluated the effect of the mutation in the cells before and after differentiation into intestinal organoids. In order to minimize genetic background effects, we also established an isogenic platform using TALEN-mediated gene editing. Comparison of normal and APC mutant iPSC revealed a significant defect in cell identity and polarity due to the presence of APC in heterozygosity as well as chromosomal aberrations including abnormal anaphases and centrosome numbers. Importantly, upon specification into intestinal progeny, APC heterozygosity was responsible for a major change in the transcriptional identity of the cells with dysregulation of key signaling pathways, including metabolic reprogramming, abnormal lipid metabolism and intestinal-specific cadherin expression. In conclusion, we have developed a novel iPSC/intestinal model of APC mutagenesis and provide strong evidence that APC in heterozygosity imparts a clear phenotypic and molecular defect, affecting basic cellular functions and integrity, providing novel insights in the earlier events of APC-mediated tumorigenesis.