Cranial sensory neurons largely derive from neurogenic placodes (epibranchial and dorsolateral), which are ectodermal thickenings that form the sensory ganglia associated with cranial nerves, but the molecular mechanisms of placodal development are unclear. Here, we show that the pharyngeal endoderm induces epibranchial neurogenesis in zebrafish, and that BMP signaling plays a crucial role in this process. Using a her5:egfp transgenic line to follow endodermal movements in living embryos, we show that contact between pharyngeal pouches and the surface ectoderm coincides with the onset of neurogenesis in epibranchial placodes. By genetic ablation and reintroduction of endoderm by cell transplantation, we show that these contacts promote neurogenesis. Using a genetic interference approach we further identify bmp2b and bmp5 as crucial components of the endodermal signals that induce epibranchial neurogenesis. Dorsolateral placodes (trigeminal, auditory, vestibular, lateral line) develop independently of the endoderm and BMP signaling, suggesting that these two sets of placodes are under separate genetic control. Our results show that the endoderm regulates the differentiation of cranial sensory ganglia, which coordinates the cranial nerves with the segments that they innervate.