Emx2 is a homeodomain protein that plays a critical role in inner ear development. Homozygous null mice die at birth with a range of defects in the CNS, renal system and skeleton. The cochlea is shorter than normal with about 60% fewer auditory hair cells. It appears to lack outer hair cells and some supporting cells are either absent or fail to differentiate. Many of the hair cells differentiate in pairs and although their hair bundles develop normally their planar cell polarity is compromised. Measurements of cell polarity suggest that classic planar cell polarity molecules are not directly influenced by Emx2 and that polarity is compromised by developmental defects in the sensory precursor population or by defects in epithelial cues for cell alignment. Planar cell polarity is normal in the vestibular epithelia although polarity reversal across the striola is absent in both the utricular and saccular maculae. In contrast, cochlear hair cell polarity is disorganized. The expression domain for Bmp4 is expanded and Fgfr1 and Prox1 are expressed in fewer cells in the cochlear sensory epithelium of Emx2 null mice. We conclude that Emx2 regulates early developmental events that balance cell proliferation and differentiation in the sensory precursor population.