To understand the mechanism by which canonical Wnt signaling sets boundaries for pattern formation in the otic vesicle (OV), we examined Tbx1 and Eya1-Six1 downstream of activated β-catenin. Tbx1, the gene for velo-cardio-facial syndrome/DiGeorge syndrome (VCFS/DGS), is essential for inner ear development where it promotes Bmp4 and Otx1 expression and restricts neurogenesis. Using floxed β-catenin gain-of-function (GOF) and loss-of-function (LOF) alleles, we found Tbx1 expression was down-regulated and maintained/enhanced in the two mouse mutants, respectively. Bmp4 was ectopically expressed and Otx1 was lost in β-catenin GOF mutants. Normally, inactivation of Tbx1 causes expanded neurogenesis, but expression of NeuroD was down-regulated in β-catenin GOF mutants. To explain this paradox, Eya1 and Six1, genes for branchio-oto-renal (BOR) syndrome were down-regulated in the OV of β-catenin GOF mutants independently of Tbx1. Overall, this work helps explain the mechanism by which Wnt signaling modulates transcription factors required for neurogenesis and patterning of the OV. Developmental Dynamics 239:1708–1722, 2010. © 2010 Wiley-Liss, Inc.