Currently, few factors have been identified that provide the inductive signals necessary to transform the simple otic placode into the complex asymmetric structure of the adult vertebrate inner ear. We provide evidence that Hedgehog signalling from ventral midline structures acts directly on the zebrafish otic vesicle to induce posterior otic identity. We demonstrate that two strong Hedgehog pathway mutants, chameleon (con(tf18b)) and slow muscle omitted (smu(b641)) exhibit a striking partial mirror image duplication of anterior otic structures, concomitant with a loss of posterior otic domains. These effects can be phenocopied by overexpression of patched1 mRNA to reduce Hedgehog signalling. Ectopic activation of the Hedgehog pathway, by injection of sonic hedgehog or dominant-negative protein kinase A RNA, has the reverse effect: ears lose anterior otic structures and show a mirror image duplication of posterior regions. By using double mutants and antisense morpholino analysis, we also show that both Sonic hedgehog and Tiggy-winkle hedgehog are involved in anteroposterior patterning of the zebrafish otic vesicle.