The sequence of events leading to otic capsule formation in the normal mouse embryo is described for both in vivo and in vitro development. Specimens were taken from embryos at 9–16 days of gestation. The in vivo results permitted the categorization of the developmental events of capsule formation into five distinct stages: prechondrogenic, aggregation, metachromatic, early chondrogenesis, and late chondrogenesis. Synthesis of sulfated glycosaminoglycans (S-GAG) by early otic tissue complexes in vivo showed a sharp increase in the rate of S-GAG production at 14.5 days of gestation (late chondrogenesis stage). The synthesis of S-GAG in explants excised from embryos 12 days old (metachromatic stage) or older followed this same pattern of a sudden increase in S-GAG synthesis at the in vitro equivalent of 14.5 days of gestation. These otic explants underwent all five stages of capsule formation up to the morphological equivalent of 16 days gestation. Therefore, otic explants can serve as a valid model in the study of those factors (i.e., tissue interactions and extracellular matrix) which influence and direct otic capsule formation.