During development cell commitment is regulated by inductive signals that are tightly controlled in time and space. In response, cells activate specific programmes, but the transcriptional circuits that maintain cell identity in a changing signalling environment are often poorly understood. Specification of inner ear progenitors is initiated by FGF signalling. Here, we establish the genetic hierarchy downstream of FGF by systematic analysis of many ear factors combined with a network inference approach. We show that FGF rapidly activates a small circuit of transcription factors forming positive feedback loops to stabilise otic progenitor identity. Our predictive network suggests that subsequently, transcriptional repressors ensure the transition of progenitors to mature otic cells, while simultaneously repressing alternative fates. Thus, we reveal the regulatory logic that initiates ear formation and highlight the hierarchical organisation of the otic gene network.