The otic placode takes its origin from surface ectoderm. Prior to the arrival of neural crest cells, surface epithelial cells adjacent to the neural folds are squamous in shape and synthesize primarily interstitial bodies. However, by 26 hours of development, neural crest cells, using the undersurface of the epithelium as a substratum, migrate away from the neural tube. Cells of surface epithelium above the neural crest cells assume a columnar shape, and the amount of intercellular space between adjacent epithelial cells is consequently reduced. Placode cells show extensive interdigitation apically as they pseudostratify and invaginate, while it appears that many of the basal cells contribute components to the underlying extracellular matrix. This extracellular matrix interface between surface epithelium and neural crest cells is distinctly fibrillar and less granular than that found between ordinary head ectoderm and primary mesenchymal cells. Just prior to complete invagination as an otocyst, otic placode cells in a region near the ventrolateral wall of the hindbrain extend cell processes through discontinuities in the basal lamina and leave the otocyst. These are likely to be the cells which contribute to the formation of the acoustico-facialis ganglion. These observations support the hypothesis that the development of the otic placode is the result of a tissue interaction between surface epithelium and neural crest cells.