The inner ear of the mouse develops from a roughly spherical epithelial vesicle, the otocyst, which undergoes a series of complex shape changes to produce the functionally important parts of an adult inner ear; in particular, a coiled cochlea--which houses the auditory apparatus, a saccule and utricle containing sensors of gravity and linear acceleration, and three precisely shaped and oriented semicircular canals, with which angular acceleration is detected. This paper follows the development of the shape of the mouse inner ear from simple otocyst until a stage when the vesicle has become a rather squat miniature model of its adult self. We have been able to visualize clearly these complex shape changes by injecting an opaque marker into the lumina of a series of fixed ears. We have further concentrated on the mechanism of formation of the semicircular canals using light-, electron-microscopic, and dye-marking techniques. Classic embryological texts describe the canals developing from outpocketings of the epithelial ear rudiment, whose opposite walls meet, fuse, and "disappear" in the central canal plate region to leave a tube of epithelium encircling their margin. To trace the fate of these "disappearing" epithelial cells we have dye-marked all of the otic epithelial cells at a stage prior to canal formation in mouse embryos which we then grow in roller culture until their canals have formed. From these marking experiments we show that the disappearing cells of the canal plate neither die nor become transformed into mesenchymal cells, but rather, most are retracted back into the canal tube epithelium at either side of the site of fusion. We speculate that this mechanism of epithelial resorption may be a common way of "losing" epithelial cells during embryonic morphogenetic remodellings.