In mammals, the sensory hair cells and auditory neurons do not spontaneously regenerate and their loss results in permanent hearing impairment. Stem cell therapy is one emerging strategy that is being investigated to overcome the loss of sensory cells after hearing loss. To successfully replace auditory neurons, stem cell-derived neurons must be electrically active, capable of organized outgrowth of processes, and of making functional connections with appropriate tissues. We have developed an in vitro assay to test these parameters using cocultures of developing cochlear explants together with neural progenitors derived from human embryonic stem cells (hESCs). We found that these neural progenitors are electrically active and extend their neurites toward the sensory hair cells in cochlear explants. Importantly, this neurite extension was found to be significantly greater when neural progenitors were predifferentiated toward a neural crest-like lineage. When grown in coculture with hair cells only (denervated cochlear explants), stem cell-derived processes were capable of locating and growing along the hair cell rows in an en passant-like manner. Many presynaptic terminals (synapsin 1-positive) were observed between hair cells and stem cell-derived processes in vitro. These results suggest that differentiated hESC-derived neural progenitors may be useful for developing therapies directed at auditory nerve replacement, including complementing emerging hair cell regeneration therapies.