The inner ear is partitioned along its dorsal/ventral axis into vestibular and auditory organs, respectively. Gene expression studies suggest that this subdivision occurs within the otic vesicle, the tissue from which all inner ear structures are derived. While the specification of ventral otic fates is dependent on Shh secreted from the notochord, the nature of the signal responsible for dorsal otic development has not been described. In this study, we demonstrate that Wnt signaling is active in dorsal regions of the otic vesicle, where it functions to regulate the expression of genes (Dlx5/6 and Gbx2) necessary for vestibular morphogenesis. We further show that the source of Wnt impacting on dorsal otic development emanates from the dorsal hindbrain, and identify Wnt1 and Wnt3a as the specific ligands required for this function. The restriction of Wnt target genes to the dorsal otocyst is also influenced by Shh. Thus, a balance between Wnt and Shh signaling activities is key in distinguishing between vestibular and auditory cell types.