The signals that induce the organ of Corti and define its boundaries in the cochlea are poorly understood. We show that two Notch modifiers, Lfng and Mfng, are transiently expressed precisely at the neural boundary of the organ of Corti. Cre-Lox fate mapping shows this region gives rise to inner hair cells and their associated inner phalangeal cells. Mutation of Lfng and Mfng disrupts this boundary, producing unexpected duplications of inner hair cells and inner phalangeal cells. This phenotype is mimicked by other mouse mutants or pharmacological treatments that lower but not abolish Notch signaling. However, strong disruption of Notch signaling causes a very different result, generating many ectopic hair cells at the expense of inner phalangeal cells. Our results show that Notch signaling is finely calibrated in the cochlea to produce precisely tuned levels of signaling that first set the boundary of the organ of Corti and later regulate hair cell development.DOI: http://dx.doi.org/10.7554/eLife.19921.001