This study presents a novel, physiologically relevant, and Alzheimer's disease (AD) patient-specific 3D microglia cell model that opens new avenues for improving personalized drug development strategies in AD. The model is based on monocyte-derived microglia-like cells (MDMi) cultured in 3D Matrigel-based systems, either as mono-cultures or co-cultures with human neural progenitor cells (ReNcell VM). The 3D co-culture system better recapitulates the functional and transcriptomic characteristics of human microglia compared to 2D cultures. Single-cell RNA sequencing (scRNAseq) analysis revealed distinct MDMi subpopulations in 3D co-cultures that exhibit higher functional heterogeneity and better resemblance to human microglia. AD patient-derived MDMi in 3D co-cultures showed altered cell-to-cell interactions, growth factor and cytokine secretion profiles, and responses to amyloid-β. Drug testing assays revealed patient- and model-specific cytokine responses. The study highlights that 3D co-cultured MDMi more closely mimic human microglia compared to monoculture models, offering a more physiologically relevant culture environment and shorter timeframe. The model also captures microglial functional heterogeneity, which is essential for understanding disease mechanisms and developing targeted therapies. The results suggest that AD patient-derived MDMi in 3D co-cultures exhibit disease-specific phenotypes, including altered secretory activity and inflammatory responses. The study underscores the importance of using appropriate in vitro models for pre-clinical drug testing, as drug responses were found to depend on the model system. This patient-specific 3D MDMi model provides a valuable tool for studying AD and developing personalized therapeutic strategies.This study presents a novel, physiologically relevant, and Alzheimer's disease (AD) patient-specific 3D microglia cell model that opens new avenues for improving personalized drug development strategies in AD. The model is based on monocyte-derived microglia-like cells (MDMi) cultured in 3D Matrigel-based systems, either as mono-cultures or co-cultures with human neural progenitor cells (ReNcell VM). The 3D co-culture system better recapitulates the functional and transcriptomic characteristics of human microglia compared to 2D cultures. Single-cell RNA sequencing (scRNAseq) analysis revealed distinct MDMi subpopulations in 3D co-cultures that exhibit higher functional heterogeneity and better resemblance to human microglia. AD patient-derived MDMi in 3D co-cultures showed altered cell-to-cell interactions, growth factor and cytokine secretion profiles, and responses to amyloid-β. Drug testing assays revealed patient- and model-specific cytokine responses. The study highlights that 3D co-cultured MDMi more closely mimic human microglia compared to monoculture models, offering a more physiologically relevant culture environment and shorter timeframe. The model also captures microglial functional heterogeneity, which is essential for understanding disease mechanisms and developing targeted therapies. The results suggest that AD patient-derived MDMi in 3D co-cultures exhibit disease-specific phenotypes, including altered secretory activity and inflammatory responses. The study underscores the importance of using appropriate in vitro models for pre-clinical drug testing, as drug responses were found to depend on the model system. This patient-specific 3D MDMi model provides a valuable tool for studying AD and developing personalized therapeutic strategies.