The epibranchial placodes are specialized areas of surface ectoderm that make a vital contribution to the peripheral nervous system, producing sensory neurons of the cranial ganglia. They have long been characterized as a series of patches of thickened ectoderm in the vicinity of each pharyngeal cleft. We have previously demonstrated that Sox3 is not only expressed in these structures but also marks a larger, earlier domain. Here we demonstrate that neurons are produced from the Sox3-positive ectoderm that lies outside of the classically-defined epibranchial placodes. Our data show that these regions contribute neurons to the cranial ganglia, but then cease producing neurons as they lose Sox3 expression. We further demonstrate that the ectoderm in these regions is responsive to extracellular or intracellular stimuli that initiate aspects of neuronal differentiation. This response to neurogenic stimuli is lacking in regions of ectoderm distant from the normal sites of neurogenesis and the response to constitutively active Bmp receptor in particular, disappears coincident with loss of Sox3 expression. Finally, we show that a dominant repressor form of Sox3 blocks the ability of the ectoderm to undergo neurogenesis. Thus, Sox3 appears to be essential for the neurogenic capacity of surface ectoderm exhibited by the epibranchial placodes.