Despite the vital importance of Fgf for otic induction, previous attempts to study otic induction through Fgf misexpression have yielded widely varying and contradictory results. There are also discrepancies regarding the ability of Fgf to induce otic tissue in ectopic locations, raising questions about the sufficiency of Fgf and the degree to which other local factors enhance or restrict otic potential. Using heat shock-inducible transgenes to misexpress Fgf3 or Fgf8 in zebrafish, we found that the stage, distribution and level of misexpression strongly influence the response to Fgf. Fgf misexpression during gastrulation can inhibit or promote otic development, depending on context, whereas misexpression after gastrulation leads to expansion of otic markers throughout preplacodal ectoderm surrounding the head. Elevated Fgf also expands expression of the putative competence factor Foxi1, which is required for Fgf to expand other otic markers. Misexpression of downstream factors Pax2a or Pax8 also expands otic markers but cannot bypass the requirement for Fgf or Foxi1. Co-misexpression of Pax2/8 with Fgf8 potentiates formation of ectopic otic vesicles expressing a full range of otic markers. These findings document the variables critically affecting the response to Fgf and clarify the roles of foxi1 and pax2/8 in the otic response.