Introduction {#S1} ============ The development of the vertebrate inner ear begins as a lateral outgrowth of the ectoderm of the early embryo, called the otic placode ([@B30]). Through a complex series of cell fate changes, mesenchymal tissue condenses into a bilayered core region, the otic capsule ([@B30]). This initial otic epithelium then invades into the otic vesicle, derived from the ectoderm, forming a fluid-filled space with a cartilaginous cup-shaped structure ([@B40]). From this structure grows a membranous labyrinth that houses the sensory organs of the auditory and vestibular systems, and the cochlear duct, which provides an entry point for sound waves ([@B31]). The otic epithelium also develops neurons and other cell types that help form its innervation and help sustain its growth and development. The formation of the vertebrate inner ear is driven by conserved signaling pathways that are important for normal morphogenesis and patterning in the vertebrate head ([@B33]; [@B43]). Many studies have focused on the function of sonic hedgehog (Shh) signaling, and others, on the role of Wnt signaling, as both pathways are required for inner ear development. Otic capsule-derived tissue provides the niche for formation of the auditory and vestibular systems through Shh activity ([@B29]; [@B44]). While Shh is crucial for cochlear and vestibular development, the effects of Hedgehog (Hh) signaling are complex, and disruption of both Hh-dependent and --independent signaling can disrupt inner ear formation, leading to altered patterning, loss of otic capsule formation and otic epithelium invagination ([@B28]; [@B26]; [@B11]). This suggests a delicate balance in the spatio-temporal regulation of Hh signaling during the early development of the inner ear. While the majority of studies on Hh signaling have focused on cell-autonomous signal transduction within target cells, paracrine communication between these cells is also essential for proper inner ear patterning and otic capsule formation. A number of studies suggest that diffusible Hh ligands bind and regulate expression of genes that are necessary for inner ear development, including *Fgf8*, *Fgf3*, and *Gli3* ([@B48]; [@B7]; [@B50]; [@B24]; [@B25]; [@B20]; [@B22]; [@B27]; [@B37]; [@B45]). *Gli3* transcription in the otic vesicle epithelium is regulated by *Hh* and *Gli3* transcription is regulated by paracrine Wnt and BMP signals ([@B12]; [@B15]; [@B21]). The expression of the transcription factor *Pou4f3* (*brn3c*), a regulator of hair cell development, is dependent on *Fgf3* and *Fgf8* signaling ([@B8]). These findings suggest that, even though the primary function of Hh signaling is to regulate cell-autonomous gene expression, Hh signaling also influences gene expression in neighboring cells through paracrine communication. While the Hh/Gli3 pathway has been extensively studied in these studies, no study to date has addressed the potential role of the Hh/Gli3 pathway in the regulation of non-neural otic capsule development, such as the expression of the transcription factors *Gata3*, *Neurod1* and *Nhlh1*, that are required for proper inner ear development. In this study, we use two independent transgenic mouse lines, *Gli3* gain- and loss-of-function (*Gli3^lacZ/lacZ^*, *Gli3* hypomorph; *Gli3^Xt/Xt^*, *Gli3* null) and *Shh*-null mouse embryos, to analyze the role of Gli3 in the regulation of patterning and formation of the otic placode. We show that the otic placode in both the absence and gain of Hh signaling undergo normal changes in size, with a reduction in the expression of genes required for otic epithelium formation. However, this expression is disrupted in the *Gli3^Xt/Xt^*mutant, which demonstrates that Gli3 regulates the expression of otic epithelium genes both directly through Hh signaling, and indirectly through non-cell-autonomous communication. Materials and Methods {#S2} ===================== Ethics Statement {#S2.SS1} ---------------- Animal experiments were performed in accordance with the ethical requirements of the NIH Guide for the Care and Use of Laboratory Animals and approved by the Institutional Animal Care and Use Committee (IACUC) of Case Western Reserve University, where the experiments were conducted. IACUC approval number is CUF\#2016-0247. The case western reserve IACUC does not provide public approvals. It accepts applications for individual protocols only for researchers whose institutions have approved animal protocols and for users with documented exemption from animal use training. Approval is granted by the director of the Case Western Reserve School of Medicine IACUC committee. Mouse Lines and Animal Husbandry {#S2.SS2} -------------------------------- *Gli3* mutant (FVB.129P2-*Gli3^tm1Zhu^*/FVB.129P2) mice with a LacZ insertion on the last exon of *Gli3*, as described by [@B2], and the null allele of *Gli3* (FVB.129P2-*Gli3^tm1Kri^*/FVB.129P2), were purchased from the Jackson Laboratory (Bar Harbor, ME, United States). *Gli3* hypomorph and *Gli3* null lines were maintained on a FVB/N background. *Shh*-null (*Shh^tm1Dcin^*) mice were maintained in a C57BL/6 background. *Gli3* mutant embryos were compared to WT littermates at embryonic day (E)12.5. *Shh* mutants were compared to *Shh^flox^* littermates. *Shh*^flox^ litters had varying amounts of deleted tissue, and *Shh*-null mutants were compared to control embryos of various ages, as previously described ([@B40]). *Gli3*^lacZ^ and control (*Gli3* WT) embryos were compared to either *Shh* WT or *Shh* mutant littermates, as previously described ([@B5]). The ages of the embryos used for RNA *in situ* hybridization analysis are indicated in the figure legends. RNAscope {#S2.SS3} -------- E12.5 *Gli3^lacZ^* and control (*Gli3* WT) embryos were fixed in fresh 4% paraformaldehyde (PFA) overnight at 4°C. The heads were removed from the embryos and embedded in paraffin following standard procedures. A custom designed RNAscope assay was performed with RNAscope probes for *Dlx5* (316431), *Fgf8* (454741), *Gata3* (401361), *Gli3* (412131), *Neurod1* (383051), and *Nhlh1* (392841) (all from ACDBio, Newark, CA, United States) following the manufacturer's instructions. Hematoxylin/Eosin Staining and Immunohistochemistry {#S2.SS4} --------------------------------------------------- E12.5 *Gli3^lacZ/lacZ^*, *Gli3^Xt/Xt^*, and *Shh* null embryos were dissected and fixed in 4% PFA in 1X PBS for at least 12 h at 4°C. Embryos were washed 3 × 10 min in 1X PBS, followed by three 5-min washes in 1X PBS/10% sucrose. The embryos were incubated in 30% sucrose overnight at 4°C, and then embedded in optimal cutting temperature compound (OCT). Frozen sections (7 μm) were obtained with a cryostat (Leica CM 1850; Leica Biosystems, Wetzlar, Germany) and adhered to SuperFrostPlus slides. Sections were washed 3 × 5 min in PBS, fixed for 5 min in ice-cold methanol/acetone (1:1), washed 3 × 5 min in PBS/0.5% Tween 20, blocked with 5% normal donkey serum in PBS/0.5% Triton X-100 for 30 min, and incubated overnight at 4°C with the antibodies for the following proteins: Caspase-3 (1:100; Cell Signaling, Danvers, MA, United States), Sox2 (1:100; R&D Systems, Minneapolis, MN, United States), Nrp2 (1:100; R&D Systems), and FoxG1 (1:100; Santa Cruz Biotechnology, Dallas, TX, United States). Secondary antibodies were obtained from Jackson ImmunoResearch (West Grove, PA, United States) and used at a 1:200 dilution. DNA was stained with 4′,6-diamidino-2-phenylindole (DAPI; Vector Labs, Burlingame, CA, United States) at a 1:100 dilution. Images were captured with a Leica DM2000 microscope and acquired with a QImaging RETIGA EXi FAST 1394 digital camera (QImaging, Surrey, BC, Canada). The number of Caspase-3 positive cells were counted using the ImageJ software (NIH Image