The inner ear is a complex sensory organ essential for hearing and balance. During embryonic development, the inner ear depends on signaling information originating from the embryonic hindbrain to establish dorsoventral and anteroposterior identity. The Hedgehog (Hh) and Wnt signaling pathways are active in the hindbrain and implicated in otic development, but their exact mechanisms of action remained unclear. We investigated the function of Hh in ear development using a mouse model where we conditionally inactivated Hh signaling in the otic vesicle, a transient embryonic structure that gives rise to the inner ear, while leaving nearby Hh dependent tissues unaffected. We found Hh signaling within the otic vesicle functions to establish ventral otic identity and drive the proliferation of cochlear-vestibular ganglion (cvg) neuroblasts that will innervate the ear. We identified presumptive Hh target genes in the developing inner ear using microarrays. Several of these presumptive Hh targets are known to function in ear development or hearing. We also identified many novel targets that have not been characterized in the ear. Many of these novel presumptive Hh target genes are expressed in the ventral otic vesicle, a region that will give rise to the cochlear duct. To interrogate the function of Wnt signaling in ear development, we used a Wnt responsive inducible Cre recombinase (TopCreERT2) to genetically label cells at different stages of ear development. We found cells that make up dorsal, vestibular, structures and cvg neurons are Wnt responsive for prolonged periods of ear development. In the cochlear duct, we found both sensory and support cells originate from a Wnt responsive population. Surprisingly, we found the Wnt responsive population of cochlear progenitors was also labeled using a cre recombinase expressed from the Gbx2 locus. TopCreERT2 and Gbx2 expression overlap in the dorsomedial wall of the otic vesicle, suggesting this region is a likely source for auditory cells.