This protocol describes a culture system in which inner-ear sensory tissue is produced from mouse embryonic stem (ES) cells under chemically defined conditions. This model is amenable to basic and translational investigations into inner ear biology and regeneration. In this protocol, mouse ES cells are aggregated in 96-well plates in medium containing extracellular matrix proteins to promote epithelialization. During the first 14 d, a series of precisely timed protein and small-molecule treatments sequentially induce epithelia that represent the mouse embryonic non-neural ectoderm, preplacodal ectoderm and otic vesicle epithelia. Ultimately, these tissues develop into cysts with a pseudostratified epithelium containing inner ear hair cells and supporting cells after 16-20 d. Concurrently, sensory-like neurons generate synapse-like structures with the derived hair cells. We have designated the stem cell-derived epithelia harboring hair cells, supporting cells and sensory-like neurons as inner ear organoids. This method provides a reproducible and scalable means to generate inner ear sensory tissue in vitro.