Functional intestines are composed of cell types from all 3 primary germ layers and are generated through a highly orchestrated and serial developmental process. Directed differentiation of human pluripotent stem cells (hPSCs) has been shown to yield gut-specific cell types; however, these structures do not reproduce critical functional interactions between cell types of different germ layers. Here, we developed a simple protocol for the generation of mature functional intestinal organoids from hPSCs under xenogeneic-free conditions. The stem cell-derived gut organoids produced here were found to contain distinct types of intestinal cells, including enterocytes, goblet cells, Paneth cells, and enteroendocrine cells, that were derived from all 3 germ layers; moreover, they demonstrated intestinal functions, including peptide absorption, and showed innervated bowel movements in response to stimulation with histamine and anticholinergic drugs. Importantly, the gut organoids obtained using this xenogeneic-free system could be stably maintained in culture for prolonged periods and were successfully engrafted in vivo. Our xenogeneic-free approach for generating gut organoids from hPSCs provides a platform for studying human intestinal diseases and for pharmacological testing.