Tay-Sachs disease (TSD) is a rare neurodegenerative disorder caused by autosomal recessive mutations in the HEXA gene on chromosome 15 that encodes β-hexosaminidase. Deficiency in HEXA results in accumulation of GM2 ganglioside, a glycosphingolipid, in lysosomes. Currently, there is no effective treatment for TSD. We generated induced pluripotent stem cells (iPSCs) from two TSD patient dermal fibroblast lines and further differentiated them into neural stem cells (NSCs). The TSD neural stem cells exhibited a disease phenotype of lysosomal lipid accumulation. The Tay-Sachs disease NSCs were then used to evaluate the therapeutic effects of enzyme replacement therapy (ERT) with recombinant human Hex A protein and two small molecular compounds: hydroxypropyl-β-cyclodextrin (HPβCD) and δ-tocopherol. Using this disease model, we observed reduction of lipid accumulation by employing enzyme replacement therapy as well as by the use of HPβCD and δ-tocopherol. Our results demonstrate that the Tay-Sachs disease NSCs possess the characteristic phenotype to serve as a cell-based disease model for study of the disease pathogenesis and evaluation of drug efficacy. The enzyme replacement therapy with recombinant Hex A protein and two small molecules (cyclodextrin and tocopherol) significantly ameliorated lipid accumulation in the Tay-Sachs disease cell model.