Despite recent advances in tissue engineered heart valves (TEHV), one of the major challenges is finding a suitable cell source for seeding TEHV scaffolds. Native heart valves are durable because valve interstitial cells (VICs) maintain tissue homeostasis by synthesizing and remodeling the extracellular matrix. In this study, we demonstrate that induced pluripotent stem cells (iPSCs) can be derived into induced mesenchymal stem cells (iMSCs) using our feeder-free protocol and then further differentiated into VICs using a 3D cell culture environment. The differentiation efficiency was quantified using flow cytometry, immunohistochemistry staining, RT-PCR, and trilineage differentiation. In addition, iMSCs were encapsulated in polyethylene (glycol) diacrylate (PEGDA) hydrogels of varying stiffness, grafted with adhesion peptide (RGDS), to promote cell proliferation, remodeling, and further differentiation into VIC-like cells. VICs phenotype was characterized by the expression of αSMA, vimentin, F-actin, and the ECM production after 7, 14, and 21 days. The results demonstrated that using our feeder-free differentiation protocol, iMSCs were differentiated from iPSCs. Our iMSCs had a 99.9% and 99.4% positive expression for MSC markers CD90 and CD44, respectively. As expected, there was 0.019% expression of CD45, which is a hematopoietic marker. In addition, iMSCs differentiated into adipogenic, chondrogenic, and osteogenic. When MSC derived cells were encapsulated in PEGDA hydrogels that mimic the leaflet modulus, we observed expression of αSMA and F-actin after 7 days. Thus, the results from this study suggest that iPSCs can be a suitable cell source for TEHV by using a feeder-free differentiation approach and 3D culture.