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Severe acute respiratory coronavirus 2 (SARS-CoV-2) causes neurological disease in the peripheral and central nervous system (PNS and CNS, respectively) of some patients. It is not clear whether SARS-CoV-2 infection or the subsequent immune response are the key factors that cause neurological disease. Here, we addressed this question by infecting human induced pluripotent stem cell-derived CNS and PNS neurons with SARS-CoV-2. SARS-CoV-2 infected a low number of CNS neurons and did not elicit a robust innate immune response. On the contrary, SARS-CoV-2 infected a higher number of PNS neurons. This resulted in expression of interferon (IFN) λ1, several IFN-stimulated genes and proinflammatory cytokines. The PNS neurons also displayed alterations characteristic of neuronal damage, as increased levels of sterile alpha and Toll/interleukin receptor motif-containing protein 1, amyloid precursor protein and α-synuclein, and lower levels of cytoskeletal proteins. Interestingly, blockade of the Janus kinase and signal transducer and activator of transcription pathway by Ruxolitinib did not increase SARS-CoV-2 infection, but reduced neuronal damage, suggesting that an exacerbated neuronal innate immune response contributes to pathogenesis in the PNS. Our results provide a basis to study coronavirus disease 2019 (COVID-19) related neuronal pathology and to test future preventive or therapeutic strategies.