The vertebrate inner ear arises from an ectodermal thickening, the otic placode, that forms adjacent to the presumptive hindbrain. Previous studies have suggested that competent ectodermal cells respond to Fgf signals from adjacent tissues and express two highly related paired box transcription factors Pax2a and Pax8 in the developing placode. We show that compromising the functions of both Pax2a and Pax8 together blocks zebrafish ear development, leaving only a few residual otic cells. This suggests that Pax2a and Pax8 are the main effectors downstream of Fgf signals. Our results further provide evidence that pax8 expression and pax2a expression are regulated by two independent factors, Foxi1 and Dlx3b, respectively. Combined loss of both factors eliminates all indications of otic specification. We suggest that the Foxi1-Pax8 pathway provides an early`jumpstart' of otic specification that is maintained by the Dlx3b-Pax2a pathway.