Interactions between FGF10 and the IIIb isoform of FGFR-2 appear to be crucial for the induction and growth of several organs, particularly those that involve budding morphogenesis. We determined their expression patterns in the inner ear and analyzed the inner ear phenotype of mice specifically deleted for the IIIb isoform of FGFR-2. FGF10 and FGFR-2(IIIb) mRNAs showed distinct, largely nonoverlapping expression patterns in the undifferentiated otic epithelium. Subsequently, FGF10 mRNA became confined to the presumptive cochlear and vestibular sensory epithelia and to the neuronal precursors and neurons. FGFR-2(IIIb) mRNA was expressed in the nonsensory epithelium of the otocyst that gives rise to structures such as the endolymphatic and semicircular ducts. These data suggest that in contrast to mesenchymal-epithelial-based FGF10 signaling demonstrated for other organs, the inner ear seems to depend on paracrine signals that operate within the epithelium. Expression of FGF10 mRNA partly overlapped with FGF3 mRNA in the sensory regions, suggesting that they may form parallel signaling pathways within the otic epithelium. In addition, hindbrain-derived FGF3 might regulate otocyst morphogenesis through FGFR-2(IIIb). Targeted deletion of FGFR-2(IIIb) resulted in severe dysgenesis of the cochleovestibular membraneous labyrinth, caused by a failure in morphogenesis at the otocyst stage. In addition to the nonsensory epithelium, sensory patches and the cochleovestibular ganglion remained at a rudimentary stage. Our findings provide genetic evidence that signaling by FGFR-2(IIIb) is critical for the morphological development of the inner ear.