The T-box transcription factor Tbx1 is required for inner ear morphogenesis. Tbx1 null mutants have a small otocyst that fails to grow and remodel and does not give rise to the vestibular and cochlear apparata. Here we show that Tbx1 expression-driven cell tracing identifies a population of otic epithelial cells that contributes to most of the otocyst. Tbx1 is essential for the contribution of this population to the inner ear. Ablation of Tbx1 after this cell population has established itself in the otocyst, restores marker expression lost in germ line mutants, but causes severe reduction in mitotic activity, cell autonomously. Furthermore, timed cell fate mapping demonstrates that loss of Tbx1 switches the fate of some members of the Tbx1-dependent cell population, from non-neurogenic to neurogenic, an event associated with activation of the Delta–Notch pathway. Finally, tissue-specific ablation of Tbx1 demonstrates that, while the abovementioned phenotypic abnormalities are due to loss of epithelial expression of Tbx1, cochlear morphogenesis requires mesodermal Tbx1 expression. We conclude that the main functions of Tbx1 in the inner ear are to control, cell-autonomously, contribution, size and fate of a large population of otic epithelial cells, and, cell non-autonomously, cochlear morphogenesis.