We measured brain activities with a whole head magnetoencephalograph (MEG) to investigate the influence of a background odor on alphabetical encoding of words in 20 healthy volunteers (10 females). Odor stimulation and control air stimulation were both accomplished with a computer-controlled olfactometer by providing permanent stimulation conditions. Behavioral data revealed significantly prolonged reaction times in men under the influence of phenylethyl alcohol (PEA) compared to the control condition. Women did not show a change in reaction time during stimulation with PEA. A comparison of men and women revealed significantly shorter reaction times in women for both the odor conditions, as well as for the control condition. Analysis of performance accuracy showed no significant differences between the odor and the control condition within and across gender. Analysis of grand averaged, event-related fields and localization of the underlying equivalent current dipoles revealed higher dipole strength in the odor, compared to the control condition in the right hemisphere, over the temporo-parietal brain areas, in the time range between 200 and 500 ms after word-onset only in male subjects. Within this time range, the gender-specific effect is interpreted to reflect odor-related modulation of word processing. The findings suggest gender-specific processing strategies in the present task with implications for differences in hemispheric laterality.