Bone morphogenetic proteins (Bmps) regulate the expression of the proneural gene Atoh1 and the generation of hair cells in the developing inner ear. The present work explored the role of Inhibitor of Differentiation genes (Id1-3) in this process. The results show that Id genes are expressed in the prosensory domains of the otic vesicle, along with Bmp4 and Bmp7. Those domains exhibit high levels of the phosphorylated form of Bmp-responding R-Smads (P-Smad1,5,8), and of Bmp-dependent Smad transcriptional activity as shown by the BRE-tk-EGFP reporter. Increased Bmp signaling induces the expression of Id1-3 along with the inhibition of Atoh1. Conversely, the Bmp antagonist Noggin or the Bmp-receptor inhibitor Dorsomorphin elicit opposite effects, indicating that Bmp signaling is necessary for Id expression and Atoh1 regulation in the otocyst. The forced expression of Id3 is sufficient to reduce Atoh1 expression and to prevent the expression of hair cell differentiation markers. Together, these results suggest that Ids are part of the machinery that mediates the regulation of hair cell differentiation exerted by Bmps. In agreement with that, during hair cell differentiation Bmp4 expression, P-Smad1,5,8 levels and Id expression are downregulated from hair cells. However, Ids are also downregulated from the supporting cells which contrarily to hair cells exhibit high levels of Bmp4 expression, P-Smad1,5,8, and BRE-tk-EGFP activity, suggesting that in these cells Ids escape from Bmp/Smad signaling. The differential regulation of Ids in time and space may underlie the multiple functions of Bmp signaling during sensory organ development.