Craniofacial morphogenesis requires proper development of pharyngeal arches and epibranchial placodes. We show that the epibranchial placodes, in addition to giving rise to cranial sensory neurons, generate a novel lineage-related non-neuronal cell population for mouse pharyngeal arch development. Eya1 is essential for the development of epibranchial placodes and proximal pharyngeal arches. We identify an Eya1-Notch regulatory axis that specifies both the neuronal and non-neuronal commitment of the epibranchial placode, where Notch acts downstream of Eya1 and promotes the non-neuronal cell fate. Notch is regulated by the threonine phosphatase activity of Eya1. Eya1 dephosphorylates p-threonine-2122 of the Notch1 intracellular domain (Notch1 ICD), which increases the stability of Notch1 ICD and maintains Notch signaling activity in the non-neuronal epibranchial placodal cells. Our data unveil a more complex differentiation program in epibranchial placodes and an important role for the Eya1-Notch axis in craniofacial morphogenesis.