To elucidate the role of thyroid hormone receptors (TRs) α1 and β in the development of hearing, cochlear functions have been investigated in mice lacking TRα1 or TRβ. TRs are ligand-dependent transcription factors expressed in the developing organ of Corti, and loss of TRβ is known to impair hearing in mice and in humans. Here, TRα1-deficient (TRα1^−/−) mice are shown to display a normal auditory-evoked brainstem response, indicating that only TRβ, and not TRα1, is essential for hearing. Because cochlear morphology was normal in TRβ^−/− mice, we postulated that TRβ regulates functional rather than morphological development of the cochlea. At the onset of hearing, inner hair cells (IHCs) in wild-type mice express a fast-activating potassium conductance, I_K,f, that transforms the immature IHC from a regenerative, spiking pacemaker to a high-frequency signal transmitter. Expression of I_K,f was significantly retarded in TRβ^−/− mice, whereas the development of the endocochlear potential and other cochlear functions, including mechanoelectrical transduction in hair cells, progressed normally. TRα1^−/− mice expressed I_K,f normally, in accord with their normal auditory-evoked brainstem response. These results establish that the physiological differentiation of IHCs depends on a TRβ-mediated pathway. When defective, this may contribute to deafness in congenital thyroid diseases.