Neurotrophins, retinoids and their receptors are present in the sensory epithelia of the inner ear during development. We show that these factors modulate the proliferation of hair cells and their K+-currents when the embryonic day 3 (ED 3) presumptive inner ear (i.e. otocyst) is maintained in organ culture. All trans-retinoic acid (RA) increases hair cell differentiation and enhances the acquisition of outward currents, including a delayed rectifier and a fast activating, transient type, voltage-gated potassium current. In contrast, brain-derived neurotrophic factor (BDNF) and neurotrophin-3 (NT-3) decrease ionic current activity, and the addition of RA with the neurotrophins enhances this inhibitory response in an age-dependent manner. We measured the total number of cells per explant over time to determine precisely when and how these factors inhibit explant growth. We found that high concentrations of BDNF and NT-3 administered together, and low concentrations of both neurotrophins combined and administered with RA suppress otocyst cell numbers after 24 h in vitro. This suppressive response is induced by RA and NT-3, not by RA and BDNF. The suppressive or inhibitory influence of NT-3 and RA is the result of NT-3 binding to the low affinity receptor, p75NTR, not the result of RA increasing mRNA levels for the high affinity receptor, trkC. However, trk may act with p75NTR, as disruption of trk signalling alleviates the inhibitory response induced by NT-3 and RA. Our data suggest that various combinations and/or concentration gradients of these factors can differentially regulate inner ear development and hair cell excitability.