Epithelial reorganization involves coordinated changes in cell shapes and movements. This restructuring occurs during formation of placodes, ectodermal thickenings that initiate the morphogenesis of epithelial organs including hair, mammary gland, and tooth. Signaling pathways in ectodermal placode formation are well known, but the cellular mechanisms have remained ill defined. We established imaging methodology for live visualization of embryonic skin explants during the first wave of hair placode formation. We found that the vast majority of placodal cells were nonproliferative throughout morphogenesis. We show that cell compaction and centripetal migration are the main cellular mechanisms associated with hair placode morphogenesis and that inhibition of actin remodeling suppresses placode formation. Stimulation of both ectodysplasin/NF-κB and Wnt/β-catenin signaling increased cell motility and the number of cells committed to placodal fate. Thus, cell fate choices and morphogenetic events are controlled by the same molecular pathways, providing the framework for coordination of these two processes.