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Loss of function (LoF) of TAR-DNA binding protein 43 (TDP-43) and mis-localization, together with TDP-43-positive and hyperphosphorylated inclusions, are found in post-mortem tissue of amyotrophic lateral sclerosis (ALS) and frontotemporal dementia (FTD) patients, including those carrying LoF variants in the progranulin gene (GRN). Modeling TDP-43 pathology has been challenging in vivo and in vitro. We present a three-dimensional induced pluripotent stem cell (iPSC)-derived paradigm-mature brain organoids (mbOrg)-composed of cortical-like-astrocytes (iA) and neurons. When devoid of GRN, mbOrgs spontaneously recapitulate TDP-43 mis-localization, hyperphosphorylation, and LoF phenotypes. Mixing and matching genotypes in mbOrgs showed that GRN iA are drivers for TDP-43 pathology. Finally, we rescued TDP-43 LoF by adding exogenous progranulin, demonstrating a link between TDP-43 LoF and progranulin expression. In conclusion, we present an iPSC-derived platform that shows striking features of human TDP-43 proteinopathy and provides a tool for the mechanistic modeling of TDP-43 pathology and patient-tailored therapeutic screening for FTD and ALS.