Abstract Background The inner ear arises from a specialized set of cells, the otic placode, that forms at the lateral edge of the neural plate adjacent to the hindbrain. Previous studies indicated that fibroblast growth factors (Fgfs) are required for otic induction; in zebrafish, loss of both Fgf3 and Fgf8 results in total ablation of otic tissue. Furthermore, gain-of-function studies suggested that Fgf signaling is not only necessary but also sufficient for otic induction, although the amount of induced ectopic otic tissue reported after misexpression of fgf3 or fgf8 varies among different studies. We previously suggested that Foxi1 and Dlx3b may provide competence to form the ear because loss of both foxi1 and dlx3b results in ablation of all otic tissue even in the presence of a fully functional Fgf signaling pathway. Results Using a transgenic line that allows us to misexpress fgf8 under the control of the zebrafish temperature-inducible hsp70 promoter, we readdressed the role of Fgf signaling and otic competence during placode induction. We find that misexpression of fgf8 fails to induce formation of ectopic otic vesicles outside of the endogenous ear field and has different consequences depending upon the developmental stage. Overexpression of fgf8 from 1-cell to midgastrula stages leads to formation of no or small otic vesicles, respectively. Overexpression of fgf8 at these stages never leads to ectopic expression of foxi1 or dlx3b, contrary to previous studies that indicated that foxi1 is activated by Fgf signaling. Consistent with our results we find that pharmacological inhibition of Fgf signaling has no effect on foxi1 or dlx3b expression, but instead, Bmp signaling activates foxi1, directly and dlx3b, indirectly. In contrast to early activation of fgf8, fgf8 overexpression at the end of gastrulation, when otic induction begins, leads to much larger otic vesicles. We further show that application of a low dose of retinoic acid that does not perturb patterning of the anterior neural plate leads to expansion of foxi1 and to a massive Fgf-dependent otic induction. Conclusion These results provide further support for the hypothesis that Foxi1 and Dlx3b provide competence for cells to respond to Fgf and form an otic placode.