This is a review of the biological processes and the main signaling pathways required to generate the different otic cell types, with particular emphasis on the actions of insulin-like growth factor I. The sensory organs responsible of hearing and balance have a common embryonic origin in the otic placode. Lineages of neural, sensory, and support cells are generated from common otic neuroepithelial progenitors. The sequential generation of the cell types that will form the adult inner ear requires the coordination of cell proliferation with cell differentiation programs, the strict regulation of cell survival, and the metabolic homeostasis of otic precursors. A network of intracellular signals operates to coordinate the transcriptional response to the extracellular input. Understanding the molecular clues that direct otic development is fundamental for the design of novel treatments for the protection and repair of hearing loss and balance disorders. Anat Rec, 2012. © 2012 Wiley Periodicals, Inc.