Crucial components of the vertebrate eye, ear and nose develop from discrete patches of surface epithelium, called placodes, which fold into spheroids and undergo complex morphogenesis. Little is known about how the changes in cell and tissue shapes are coordinated with the acquisition of cell fates. Here we explore whether these processes are regulated by common transcriptional mechanisms in the developing ear. After specification, inner ear precursors elongate to form the placode, which invaginates and is transformed into the complex structure of the adult ear. We show that the transcription factor Pax2 plays a key role in coordinating otic fate and placode morphogenesis, but appears to regulate each process independently. In the absence of Pax2, otic progenitors not only lose otic marker expression, but also fail to elongate due to the loss of apically localised N-cadherin and N-CAM. In the absence of either N-cadherin or N-CAM otic cells lose apical cell–cell contact and their epithelial shape. While misexpression of Pax2 leads to ectopic activation of both adhesion molecules, it is not sufficient to confer otic identity. These observations suggest that Pax2 controls cell shape independently from cell identity and thus acts as coordinator for these processes.