The vertebrate inner ear is a complex structure responsible for hearing and balance. The inner ear houses sensory epithelia composed of mechanosensory hair cells and non-sensory support cells. Hair cells synapse with neurons of the VIIIth cranial ganglion, the statoacoustic ganglion (SAG), and transmit sensory information to the hindbrain. This dissertation focuses on the development and regulation of both sensory and neuronal cell populations. The sensory epithelium is established by the basic helixloop- helix transcription factor Atoh1. Misexpression of atoh1a in zebrafish results in induction of ectopic sensory epithelia albeit in limited regions of the inner ear. We show that sensory competence of the inner ear can be enhanced by co-activation of fgf8/3 or sox2, genes that normally act in concert with atoh1a. The developing sensory epithelia express several factors that regulate differentiation and maintenance of hair cells. We show that pax5 is differentially expressed in the anterior utricular macula (sensory epithelium). Knockdown of pax5 function results in utricular hair cell death and subsequent loss of vestibular (balance) but not auditory (hearing) defects. SAG neurons are formed normally in these embryos but show disorganized dendrites in the utricle following loss of hair cells. Lastly, we examine the development of SAG. SAG precursors (neuroblasts) are formed in the floor of the ear by another basic helix-loophelix transcription factor neurogenin1 (neurog1). We show that Fgf emanating from the utricular macula specifies neuroblasts, that later delaminate from the otic floor and undergo a phase of proliferation. Neuroblasts then differentiate into bipolar neurons that extend processes to hair cells and targets in the hindbrain. We show evidence that differentiating neurons express fgf5 and regulate further development of the SAG. As more differentiated neurons accumulate, increasing level of Fgf terminates the phase of neuroblast specification. Later on, elevated Fgf stabilizes the transit-amplifying phase and inhibits terminal differentiation. Thus, Fgf signaling regulates SAG development at various stages to ensure that proper number of neurons is generated.