The development, maturation, and maintenance of the inner ear are governed by temporal and spatial expression cascades of transcription factors that form a gene regulatory network. ISLET1 (ISL1) may be one of the major players in this cascade, and in order to study its role in the regulation of inner ear development, we produced a transgenic mouse overexpressing Isl1 under the Pax2 promoter. Pax2-regulated ISL1 overexpression increases the embryonic ISL1⁺ domain and induces accelerated nerve fiber extension and branching in E12.5 embryos. Despite these gains in early development, the overexpression of ISL1 impairs the maintenance and function of hair cells of the organ of Corti. Mutant mice exhibit hyperactivity, circling behavior, and progressive age-related decline in hearing functions, which is reflected in reduced otoacoustic emissions (DPOAEs) followed by elevated hearing thresholds. The reduction of the amplitude of DPOAEs in transgenic mice was first detected at 1 month of age. By 6–9 months of age, DPOAEs completely disappeared, suggesting a functional inefficiency of outer hair cells (OHCs). The timing of DPOAE reduction coincides with the onset of the deterioration of cochlear efferent terminals. In contrast to these effects on efferents, we only found a moderate loss of OHCs and spiral ganglion neurons. For the first time, our results show that the genetic alteration of the medial olivocochlear (MOC) efferent system induces an early onset of age-related hearing loss. Thus, the neurodegeneration of the MOC system could be a contributing factor to the pathology of age-related hearing loss.