The mammalian inner ear comprises the cochleovestibular labyrinth, derived from the ectodermal otic placode, and the encasing bony labyrinth of the temporal bone. Epithelial-mesenchymal interactions are thought to control inner ear development, but the modes and the molecules involved are largely unresolved. We show here that, during the precartilage and cartilage stages, Fgf9 is expressed in specific nonsensory domains of the otic epithelium and its receptors, Fgfr1(IIIc) and Fgfr2(IIIc), widely in the surrounding mesenchyme. To address the role of Fgf9 signaling, we analyzed the inner ears of mice homozygous for Fgf9 null alleles. Fgf9 inactivation leads to a hypoplastic vestibular component of the otic capsule and to the absence of the epithelial semicircular ducts. Reduced proliferation of the prechondrogenic mesenchyme was found to underlie capsular hypoplasticity. Semicircular duct development is blocked at the initial stages, since fusion plates do not form. Our results show that the mesenchyme directs fusion plate formation and they give direct evidence for the existence of reciprocal epithelial-mesenchymal interactions in the developing inner ear. In addition to the vestibule, in the cochlea, Fgf9 mutation caused defects in the interactions between the Reissner's membrane and the mesenchymal cells, leading to a malformed scala vestibuli. Together, these data show that Fgf9 signaling is required for inner ear morphogenesis.