Fibroblast growth factor (FGF) signaling is crucial for the induction and growth of the ear, a sensory organ that involves intimate tissue interactions. Here, we report the abnormality of Fgf10 null ear and the identification of a cis‐regulatory element directing otic expression of Fgf10. In Fgf10 null inner ears, we found that the initial development of semicircular, vestibular, and cochlear divisions is roughly normal, after which there are abnormalities of semicircular canal/cristae and vestibular development. The mutant semicircular disks remain without canal formation by the perinatal stage. To elucidate regulation of the Fgf10 expression during inner ear development, we isolated a 6.6‐kb fragment of its 5′‐upstream region and examined its transcriptional activity with transgenic mice, using a lacZ‐reporter system. From comparison of the mouse sequences of the 6.6‐kb fragment with corresponding sequences of the human and chicken Fgf10, we identified a 0.4‐kb enhancer sequence that drives Fgf10 expression in the developing inner ear. The enhancer sequences have motifs for many homeodomain‐containing proteins (e.g., Prx, Hox, Nkx), in addition to POU‐domain factors (e.g., Brn3), zinc‐finger transcription factors (e.g., GATA‐binding factors), TCF/LEF‐1, and a SMAD‐interacting protein. Thus, FGF10 signaling is dispensable for specification of otic compartment identity but is required for hollowing the semicircular disk. Furthermore, the analysis of a putative inner ear enhancer of Fgf10 has disclosed a complicated regulation of Fgf10 during inner ear development by numerous transcription factors and signaling pathways. Developmental Dynamics 233:177–187, 2005. © 2005 Wiley‐Liss, Inc.