Ionocytes are specialized epithelial cell types involved in the maintenance of osmotic homeostasis. In amniotes, they are present in the renal system, while in water-living embryos of lower vertebrates additional ionocytes are found in the skin. Thus far, relatively little has been known about the mechanisms of ionocyte development. Here we demonstrate that skin ionocytes of zebrafish embryos derive from the same precursor cells as keratinocytes. Carrying out various combinations of gain- and loss-of-function studies, we show that the segregation of ionocytes from the epidermal epithelium is governed by an interplay between Notch signaling and two Forkhead-box transcription factors, Foxi3a and Foxi3b. The two foxi3 genes are expressed in ionocyte precursors and are required both for ionocyte-specific expression of the Notch ligand Jagged2a, and for ionocyte differentiation, characterized by the production of particular ATPases. Ionocytic Notch ligands, in turn, signal to neighboring cells, where activated Notch1 leads to a repression of foxi3 expression, allowing those cells to become keratinocytes. A model for ionocyte versus keratinocyte development will be presented, postulating additional thus far unidentified pro-ionocyte factors.