Rett syndrome (RTT) is caused by mutations of MECP2, a methyl CpG binding protein thought to act as a global transcriptional repressor. Here we show, using an isogenic human embryonic stem cell model of RTT, that MECP2 mutant neurons display key molecular and cellular features of this disorder. Unbiased global gene expression analyses demonstrate that MECP2 functions as a global activator in neurons but not in neural precursors. Decreased transcription in neurons was coupled with a significant reduction in nascent protein synthesis and lack of MECP2 was manifested as a severe defect in the activity of the AKT/mTOR pathway. Lack of MECP2 also leads to impaired mitochondrial function in mutant neurons. Activation of AKT/mTOR signaling by exogenous growth factors or by depletion of PTEN boosted protein synthesis and ameliorated disease phenotypes in mutant neurons. Our findings indicate a vital function for MECP2 in maintaining active gene transcription in human neuronal cells.