Epithelial fusion is a fundamental morphogenetic process critical for the closure and compartmentalisation of developing organs. While widely studied in systems such as neural tube and palatal closure, the cellular transitions that enable fusion remain poorly understood. Here, we investigate epithelial fusion during chick otic vesicle closure and identify a transient population of cells at the epithelial interface that mediate this process. These otic epithelial edge (OE) cells exhibit distinct morphology, reduced apicobasal polarity, and dynamic junctional remodelling, including altered distribution of ZO-1, CDH1 and RAC1. Notably, OE cells lack basal contact and display high sphericity, consistent with a partial epithelial-to-mesenchymal transition (EMT) phenotype. Transcriptomic profiling of microdissected tissues reveals that OE cells constitute a transcriptionally distinct population, enriched for EMT regulators, extracellular matrix remodelling genes, and WNT pathway components. Among these, the transcription factors Grhl2 and Sp8 were specifically expressed at the OE and exhibited opposing roles in epithelial identity. CRISPR-Cas9-mediated knockdown of either gene led to disrupted CDH1 localisation, loss of OE cell morphology and failure in epithelial segregation. These results suggest that epithelial fusion requires a regulated, hybrid EMT state that balances junctional plasticity with tissue cohesion. Our findings demonstrate that fusion-competent epithelial cells are not merely passive participants but actively modulate their shape, polarity, adhesion and genetic identity to enable morphogenesis.