Gfi1 was first identified as causing interleukin 2-independent growth in T cells and lymphomagenesis in mice. Much work has shown that Gfi1 and Gfi1b, a second mouse homolog, play pivotal roles in blood cell lineage differentiation. However, neither Gfi1 nor Gfi1b has been implicated in nervous system development, even though their invertebrate homologues, senseless in Drosophila and pag-3 in C. elegans are expressed and required in the nervous system. We show that Gfi1 mRNA is expressed in many areas that give rise to neuronal cells during embryonic development in mouse, and that Gfi1 protein has a more restricted expression pattern. By E12.5 Gfi1 mRNA is expressed in both the CNS and PNS as well as in many sensory epithelia including the developing inner ear epithelia. At later developmental stages, Gfi1 expression in the ear is refined to the hair cells and neurons throughout the inner ear. Gfi1 protein is expressed in a more restricted pattern in specialized sensory cells of the PNS, including the eye, presumptive Merkel cells, the lung and hair cells of the inner ear. Gfi1 mutant mice display behavioral defects that are consistent with inner ear anomalies, as they are ataxic, circle, display head tilting behavior and do not respond to noise. They have a unique inner ear phenotype in that the vestibular and cochlear hair cells are differentially affected. Although Gfi1-deficient mice initially specify inner ear hair cells, these hair cells are disorganized in both the vestibule and cochlea. The outer hair cells of the cochlea are improperly innervated and express neuronal markers that are not normally expressed in these cells. Furthermore, Gfi1 mutant mice lose all cochlear hair cells just prior to and soon after birth through apoptosis. Finally, by five months of age there is also a dramatic reduction in the number of cochlear neurons. Hence, Gfi1 is expressed in the developing nervous system, is required for inner ear hair cell differentiation, and its loss causes programmed cell death.