The otic primordium belongs to a group of related structures, the sensory placodes that contribute to the paired sense organs - ear, eye and olfactory epithelium - and to the distal parts of the cranial sensory ganglia. Recent evidence suggests that despite their diversity, all placodes share a common developmental origin and a common molecular mechanism which initiates their formation. At the base of placode induction lies the specification of a unique "placode field", termed the preplacodal region and acquisition of this "preplacodal state" is required for ectodermal cells to undergo otic development. Here I review the molecular mechanisms that sequentially subdivide the ectoderm to give rise to the placode territory.