Astrocytic differentiation is developmentally impaired in patients with childhood-onset schizophrenia (SCZ). To determine why, we used genetic gain- and loss-of-function studies to establish the contributions of differentially expressed transcriptional regulators to the defective differentiation of glial progenitor cells (GPCs) produced from SCZ patient-derived induced pluripotent cells (iPSCs). Negative regulators of the bone morphogenetic protein (BMP) pathway were upregulated in SCZ GPCs, including BAMBI, FST, and GREM1, whose overexpression retained SCZ GPCs at the progenitor stage. SMAD4 knockdown (KD) suppressed the production of these BMP inhibitors by SCZ GPCs and rescued normal astrocytic differentiation. In addition, the BMP-regulated transcriptional repressor REST was upregulated in SCZ GPCs, and its KD similarly restored normal glial differentiation. REST KD also rescued potassium-transport-associated gene expression and K⁺ uptake, which were otherwise deficient in SCZ glia. These data suggest that the glial differentiation defect in childhood-onset SCZ, and its attendant disruption in K⁺ homeostasis, may be rescued by targeting BMP/SMAD4- and REST-dependent transcription. Astrocytic differentiation is impaired in childhood-onset schizophrenia (SCZ). Liu et al. report that SMAD4-dependent BMP signaling and REST are upregulated in hiPSC-derived SCZ glia and that SMAD4 and REST knockdown rescue both astroglial differentiation and K⁺ transport. SCZ astrocytic maturation may thus be rescued by targeting SMAD4- and REST-dependent transcription.