The fruit fly, Drosophila melanogaster, is equipped with a sophisticated olfactory sensory system that permits it to recognize and discriminate hundreds of discrete odorants. The perception of these odorants is essential for the animal to identify relevant food sources and suitable sites for egg-laying. Advances in the last year have begun to define the molecular basis of this insect's discriminatory power. The identification of a large multi-gene family of candidate Drosophila odorant receptors suggests that, as in other animals, a multitude of distinct odorants is recognized by a diversity of ligand-binding receptors. How olfactory signals are transduced and interpreted by the brain remains an important question for future analysis. The availability of genetic tools and a complete genome sequence makes Drosophila a particularly attractive organism for studying the molecular basis of olfaction.