To elucidate the role of thyroid hormone receptors (TRs) alpha1 and beta in the development of hearing, cochlear functions have been investigated in mice lacking TRalpha1 or TRbeta. TRs are ligand-dependent transcription factors expressed in the developing organ of Corti, and loss of TRbeta is known to impair hearing in mice and in humans. Here, TRalpha1-deficient (TRalpha1(-/-)) mice are shown to display a normal auditory-evoked brainstem response, indicating that only TRbeta, and not TRalpha1, is essential for hearing. Because cochlear morphology was normal in TRbeta-/- mice, we postulated that TRbeta regulates functional rather than morphological development of the cochlea. At the onset of hearing, inner hair cells (IHCs) in wild-type mice express a fast-activating potassium conductance, IK,f, that transforms the immature IHC from a regenerative, spiking pacemaker to a high-frequency signal transmitter. Expression of IK,f was significantly retarded in TRbeta-/- mice, whereas the development of the endocochlear potential and other cochlear functions, including mechanoelectrical transduction in hair cells, progressed normally. TRalpha1(-/-) mice expressed IK,f normally, in accord with their normal auditory-evoked brainstem response. These results establish that the physiological differentiation of IHCs depends on a TRbeta-mediated pathway. When defective, this may contribute to deafness in congenital thyroid diseases.