The epibranchial placodes generate the neurons of the geniculate, petrosal, and nodose cranial sensory ganglia. Previously, it has been shown that bone morphogenetic proteins (BMPs) are involved in the formation of these structures. However, it has been unclear as to whether BMP signalling has an ongoing function in directing the later development of the epibranchial placodes, and how this signalling is regulated. Here, we demonstrate that BMPs maintain placodal neurogenesis and that their activity is modulated by a member of the Cerberus/Dan family of BMP antagonists, Protein Related to Dan and Cerberus (PRDC). We find that Bmp4 is expressed in the epibranchial placodes while Bmp7 and PRDC are expressed in the pharyngeal pouches. The timing and regional expression of these three genes suggest that BMP7 is involved in inducing placode neurogenesis and BMP4 in maintaining it and that BMP activity is modulated by PRDC. To investigate this hypothesis, we have performed both gain- and loss- of-function experiments with PRDC and find that it can modulate the BMP signals that induce epibranchial neurogenesis: a gain of PRDC function results in a loss of Bmp4 and hence placode neurogenesis is inhibited; conversely, a loss of PRDC function induces ectopic Bmp4 and an expansion of placode neurogenesis. This modulation is therefore necessary for the number and positioning of the epibranchial neurons.