Use of human induced pluripotent stem cells (iPSC) or embryonic stem cells (ESC) for cell replacement therapies holds great promise. Several limitations including low yields and heterogeneous populations of differentiated cells hinder the progress of stem cell therapies. A fate restricted immortalized multipotent otic progenitor (iMOP) cell line was generated to facilitate efficient differentiation of large numbers of functional hair cells and spiral ganglion neurons (SGN) for inner ear cell replacement therapies. Starting from dissociated cultures of single iMOP cells, protocols that promote cell cycle exit and differentiation by basic fibroblast growth factor (bFGF) withdrawal were described. A significant decrease in proliferating cells after bFGF withdrawal was confirmed using an EdU cell proliferation assay. Concomitant with a decrease in proliferation, successful differentiation resulted in expression of molecular markers and morphological changes. Immunostaining of Cdkn1b (p27(KIP)) and Cdh1 (E-cadherin) in iMOP-derived otospheres was used as an indicator for differentiation into inner ear sensory epithelia while immunostaining of Cdkn1b and Tubb3 (neuronal β-tubulin) was used to identify iMOP-derived neurons. Use of iMOP cells provides an important tool for understanding cell fate decisions made by inner ear neurosensory progenitors and will help develop protocols for generating large numbers of iPSC or ESC-derived hair cells and SGNs. These methods will accelerate efforts for generating otic cells for replacement therapies.