The auditory and vestibular structures of the inner ear mediate our senses of hearing and balance, respectively. Recent progress has been made in identifying some of the causes of hereditary forms of deafness and vestibular disease in humans; however, a detailed understanding of the genetic pathways coordinating inner ear development remains limited. By identifying the genetic networks regulating inner ear morphogenesis, our understanding of the association between otic development and disease should improve. The principal components for hearing (the cochlea) and balance (the semicircular canals, utricle and saccule) are formed from ventral and dorsal outgrowths, respectively, of a common bilateral structure, the otocyst. Organization of the inner ear into auditory and vestibular components is dependent on localized patterns of gene expression within the otic vesicle. Surrounding tissues are known to influence compartmentalization of the otic vesicle, yet the participating signals remain unclear. The notochord and floor plate are sources of the secreted protein Sonic hedgehog (Shh) that functions in both short and long range signaling events to promote growth and differentiation of progenitor cells in the ventral neural tube and paraxial structures. In the absence of Shh, ventral otic derivatives including the cochlear duct and cochleovestibular ganglia fail to develop. The origin of the inner ear defects in Shh -/- embryos can be attributed to alterations in the expression of a number of genes previously implicated in the specification of cochlear, neuronal and chondrogenic lineages. Although the effects of Shh signaling are detected in the otic epithelium, adjacent tissues including the periotic mesenchyme and neural tube are also targets of Shh action. This brings into question the relative contribution of Shh signaling in each of the tissues impacting on inner ear development. Experiments outlined in this proposal are aimed at elucidating the mechanism by which Shh specifies auditory cell fates in the ventral otocyst. The temporal and spatial requirements of Hedgehog (Hh) signaling in inner ear development will be addressed by the conditional inactivation of Smoothened, an essential transducer of all Hh signals, in each of the tissues impacting on the otic vesicle. Experiments to identity the downstream effectors of Shh signaling in otic development are also proposed. Finally, despite preliminary insights into how auditory cell fates are specified, little is known of the extrinsic cues that establish vestibular (dorsal) structures in the otic vesicle. Introduction of specific pathway inhibitors into the dorsal otocyst using transgenic approaches as well as the assessment of mouse mutants in candidate dorsalizing factors should contribute towards our overall understanding of how polarity is established along the dorsoventral axis of the inner ear.