In the past few years, a major advance was made in understanding early events in olfaction. In particular, a molecular basis for the sense of smell has emerged. I will focus on the most recent data obtained on an extremely large subfamily of putative odorant receptors. These results may explain how the olfactory system can recognize and distinguish thousands of odoriferous molecules and how the spatial coding of odor molecules could be generated in the olfactory epithelium and subsequently transmitted to the olfactory bulb. The putative odor receptors are a subfamily of seven-transmembrane-domain G protein-coupled receptors; although their functions have not yet been definitively proven, they may act as odor receptors. This new receptor gene family has the following characteristics: 1) It is a multigene family of phylogenetically related sequences consisting of approximately 100 members in fish and up to approximately 1000 members in rodents. 2) Members of this family are expressed in the olfactory epithelium (olfactory receptors). Related genes are expressed in the gustatory epithelium of the tongue (gustatory receptors), and in sperm cells (germ-cell receptors). 3) Genes for the olfactory receptor family have been isolated from several species including fish, rat, mouse, human and chick. 4) Olfactory receptor protein seems to be localized on the ciliary surface of olfactory neurons. 5) On the basis of a reconstitution experiment, olfactory receptors exhibit broad ligand specificity. 6) A single receptor is expressed in only 0.1%-2% of the entire olfactory neuron population. 7) A single olfactory neuron expresses only a subset of the entire receptor gene repertoire. 8) The spatial distribution of individual receptors on the surface of the olfactory epithelium is random in fish but segregated with bilateral symmetry in rodents. 9) Based on a developmental study, some members of the olfactory receptor family are expressed in the developing mouse olfactory epithelium as early as embryonic day E12. 10) In mice at E10, the receptor designated OR3 was not found in the progenitor cells of olfactory neurons in the olfactory placode, but was found in neural crest cells, suggesting a central origin for some olfactory neurons. These results together with their functional implications and several hypotheses concerning basic events in olfaction will be discussed.