Mutations in CHD7 cause CHARGE syndrome, affecting multiple organs including the inner ear in humans. We investigate how CHD7 mutations affect inner ear development using human pluripotent stem cell-derived organoids as a model system. We find that loss of CHD7 or its chromatin remodeling activity leads to complete absence of hair cells and supporting cells, which can be explained by dysregulation of key otic development-associated genes in mutant otic progenitors. Further analysis of the mutant otic progenitors suggests that CHD7 can regulate otic genes through a chromatin remodeling-independent mechanism. Results from transcriptome profiling of hair cells reveal disruption of deafness gene expression as a potential underlying mechanism of CHARGE-associated sensorineural hearing loss. Notably, co-differentiating CHD7 knockout and wild-type cells in chimeric organoids partially rescues mutant phenotypes by restoring otherwise severely dysregulated otic genes. Taken together, our results suggest that CHD7 plays a critical role in regulating human otic lineage specification and hair cell differentiation.