The proneural gene Atoh1 is crucial for the development of inner ear hair cells and it requires the function of the transcription factor Sox2 through yet unknown mechanisms. In the present work, we used the chicken embryo and HEK293T cells to explore the regulation of Atoh1 by Sox2. The results show that hair cells derive from Sox2-positive otic progenitors and that Sox2 directly activates Atoh1 through a transcriptional activator function that requires the integrity of Sox2 DNA binding domain. Atoh1 activation depends on Sox transcription factor binding sites (SoxTFBS) present in the Atoh1 3' enhancer where Sox2 directly binds, as shown by site directed mutagenesis and chromatin immunoprecipitation (ChIP). In the inner ear, Atoh1 enhancer activity is detected in the neurosensory domain and it depends on Sox2. Dominant negative competition (Sox2HMG-Engrailed) and mutation of the SoxTFBS abolish the reporter activity in vivo. Moreover, ChIP assay in isolated otic vesicles shows that Sox2 is bound to the Atoh1 enhancer in vivo. However, besides activating Atoh1, Sox2 also promotes the expression of Atoh1 negative regulators and the temporal profile of Atoh1 activation by Sox2 is transient suggesting that Sox2 triggers an incoherent feed-forward loop. These results provide a mechanism for the prosensory function of Sox2 in the inner ear. We suggest that sensory competence is established early in otic development through the activation of Atoh1 by Sox2, however, hair cell differentiation is prevented until later stages by the parallel activation of negative regulators of Atoh1 function.