Polygenic risk scores (PRSs) have been among the leading advances in biomedicine in recent years. As a proxy of genetic liability, PRSs are utilised across multiple fields and applications. While numerous statistical and machine learning methods have been developed to optimise their predictive accuracy, all of these distil genetic liability to a single number based on aggregation of an individual’s genome-wide alleles. This results in a key loss of information about an individual’s genetic profile, which could be critical given the functional sub-structure of the genome and the heterogeneity of complex disease. Here we evaluate the performance of pathway-based PRSs, in which polygenic scores are calculated across genomic pathways for each individual, and we introduce a software, PRSet, for computing and analysing pathway PRSs. We find that pathway PRSs have similar power for evaluating pathway enrichment of GWAS signal as the leading methods, with the distinct advantage of providing estimates of pathway genetic liability at the individual-level. Exemplifying their utility, we demonstrate that pathway PRSs can stratify diseases into subtypes in the UK Biobank with substantially greater power than genome-wide PRSs. Compared to genome-wide PRSs, we expect pathway-based PRSs to offer greater insights into the heterogeneity of complex disease and treatment response, generate more biologically tractable therapeutic targets, and provide a more powerful path to precision medicine.