hmx2 (nkx5.2) and hmx3 (nkx5.1) are highly conserved homeobox transcription factors required for mouse inner ear development. We have identified four hmx genes that are expressed in developing mechanosensory organs in zebrafish. Knockdown of both hmx2 and hmx3 disrupts formation of the mechanosensory neuromasts and also leads to impaired vestibular function in which utricular maculae fail to develop and the utricular otolith gradually fuses with the saccular otolith. We demonstrate that pax5, known to be required for development of the utricular maculae, is expressed downstream of hmx2 and hmx3. In addition, we show that FGF signalling regulates expression of hmx2 and hmx3 in the otic vesicle, and conversely, hmx2 and hmx3 maintain the expression of fgf ligands, thus revealing a novel tissue specific feedback mechanism. Our data suggest that hmx2 and hmx3 act as cell autonomous factors required redundantly for cell fate specification and differentiation during inner ear and lateral line development.