To define the signal transduction pathway of retinoic acid during inner ear development, we analyzed the expression patterns of transcripts encoding the three retinoic acid receptors (RARalpha, beta, and gamma) and related them to phenotypes resulting from single or compound inactivation of these nuclear receptors. The expression of all three RARs was observed in the developing mouse otocyst as early as embryonic day 10.5 (E10.5)-E12.5 and continued into adulthood. Expression domains of the three RAR receptors, however, were largely non-overlapping: RARalpha was predominantly expressed in the developing sensory epithelium, RARbeta in inner ear mesenchymal tissues and RARgamma in the differentiating otic capsule. In the adult, RARalpha and RARgamma transcripts were found in the organ of Corti and the spiral ganglion, whereas RARbeta transcripts were localized in mesenchyme-derived tissues. RARalpha, beta, and gamma null mutant mice, as well as RARalpha/RARbeta and RARbeta/RARgamma combined null fetuses, did not present any noticeable morphological abnormalities in the inner ear. In contrast, RARalpha/RARgamma null mutants displayed a severe hypoplasia of the otocyst that was already visible at E10.5 without any visible endolymphatic duct. The hypoplastic otocyst in RARalpha/RARgamma null mutants was characterized by impaired chondrocyte differentiation and neural development. After the second week of gestation, these mutant fetuses lacked all of the semi-circular canals and the endolymphatic duct and displayed strong anomalies in the inner ear structures. The morphological deficits were generally more severe in the cochlear portion than in the vestibular portion of the inner ear. Altogether, these results demonstrate that RARalpha and RARgamma play an essential role in the initial differentiation of otic placode derivatives, whereas RARbeta plays a minimal role in this process.