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Individuals homozygous for the pathogenic “Z” mutation in alpha-1 antitrypsin deficiency (AATD) are known to be at increased risk for chronic liver disease. That some degree of risk is similarly conferred by the heterozygous state, estimated to affect 2% of the US population, has also become clear. A lack of model systems that recapitulate heterozygosity in human hepatocytes has limited the ability to study the impact of expressing a single ZAAT allele on hepatocyte biology. Here, through the application of CRISPR-Cas9 editing, we describe the derivation of syngeneic induced pluripotent stem cells (iPSCs) engineered to determine the effects of ZAAT heterozygosity in iPSC-derived hepatocytes (iHeps) relative to homozygous mutant (ZZ) or corrected (MM) cells. We find that heterozygous MZ iHeps exhibit an intermediate disease phenotype and share with ZZ iHeps alterations in AAT protein processing and downstream perturbations in hepatic metabolic function including ER and mitochondrial morphology, reduced mitochondrial respiration, and branch-specific activation of the unfolded protein response in subpopulations of cells. Our cellular model of MZ heterozygosity thus provides evidence that expression of a single Z allele is sufficient to disrupt hepatocyte homeostatic function and suggest a mechanism underlying the increased risk of liver disease observed among MZ individuals.