Stem cell pluripotency gene Sox2 stimulates expression of proneural basic-helix-loop-helix transcription factor Atoh1. Sox2 is necessary for the development of cochlear hair cells and binds to the Atoh1 3' enhancer to stimulate Atoh1 expression. We show here that Sox2 deletion in late embryogenesis results in the formation of extra hair cells, in contrast to the absence of hair cell development obtained after Sox2 knockout early in gestation. Sox2 overexpression decreased the level of Atoh1 protein despite an increase in Atoh1 mRNA. Sox2 upregulated E3 ubiquitin ligase, Huwe1, by direct binding to the Huwe1 gene. By upregulating its cognate E3 ligase, Sox2 disrupts the positive feedback loop through which Atoh1 protein increases the expression of Atoh1. We conclude that Sox2 initiates expression, while also limiting continued activity of bHLH transcription factor, Atoh1, and this inhibition represents a new mechanism for regulating the activity of this powerful initiator of hair cell development.