The vertebrate inner ear arises from the otic placode, a transient thickening of ectodermal epithelium adjacent to neural crest domains in the presumptive head. During late gastrulation, cells fated to comprise the inner ear are part of a domain in cranial ectoderm that contain precursors of all sensory placodes, termed the preplacodal region (PPR). The combination of low levels of BMP activity coupled with high levels of FGF signaling are required to establish the PPR through induction of members of the six/eya/dach, iro, and dlx families of transcription factors. The zebrafish dlx3b/4b transcription factors are expressed at the neural plate border where they play partially redundant roles in the specification of the PPR, otic and olfactory placodes. We demonstrate that dlx3b/4b assist in establishing the PPR through the transcriptional regulation of the BMP antagonist cv2. Morpholino-mediated knockdown of Dlx3b/4b results in loss of cv2 expression in the PPR and a transient increase in Bmp4 activity that lasts throughout early somitogenesis. Through the cv2-mediated inhibition of BMP activity, dlx3b/4b create an environment where FGF activity is favorable for PPR and otic marker expression. Our results provide insight into the mechanisms of PPR specification as well as the role of dlx3b/4b function in PPR and otic placode induction.