Thyroid hormone plays an important role in hearing development. Hereditary hypothyroidism is frequently associated with sensorineural hearing loss as identified in both animal models and human patients. Building upon our original demonstration of congenital deafness and hair cell abnormality in a hyt/hyt mouse model which carries an autosomal recessive mutation causing hereditary hypothyroidism, we investigated the functional capacity of the outer hair cell (OHC) system in these animals using distortion product otoacoustic emissions (DPOAEs). In particular, the amplitude and detection features of DPOAEs were correlated with measures of the auditory brainstem response (ABR) as well as the cellular structure and ultrastructure of the organ of Corti. Input-output (I/O) functions for the 2f(2)-f(1) DPOAEs were obtained for frequencies from 2 to 18 kHz. The thresholds were significantly higher and amplitudes were significantly lower in the homozygous mice (hyt/hyt) than in both heterozygous mice (hyt/+) and wild-type controls at DPOAE frequencies recorded above 6 kHz. Hearing thresholds were significantly elevated in the mutant compared to control mice. In addition, morphological studies revealed consistent inner ear defects in hyt/hyt animals including distortion of the tectorial membrane, dysplasia of the tunnel of Corti and distinct OHC abnormalities. The most striking histopathological finding was a contiguous membrane along the apices of all of the OHC stereocilia. Such ultrastructural changes in the stereocilia of the OHC may limit the deflection of the stereocilia and therefore affect an active cochlear function that produces otoacoustic emissions as well as cause a failure to evoke the normal action potentials in the auditory nerve. From both functional and morphologic evaluations, it was concluded that the OHC system is the most susceptible to the developmental effects of congenital hypothyroidism in the hyt/hyt mouse. The normal OHCs with well-developed ciliary bundles are crucial to maintain the activity of biological mechanisms within the cochlea.