In the insect olfactory system, oscillatory synchronization is functionally relevant and reflects the coherent activation of dynamic neural assemblies. We examined the role of such oscillatory synchronization in information transfer between networks in this system. The antennal lobe is the obligatory relay for olfactory afferent signals and generates oscillatory output. The mushroom body is responsible for formation and retrieval of olfactory and other memories. The format of odor representations differs significantly across these structures. Whereas representations are dense, dynamic, and seemingly redundant in the antennal lobe, they are sparse and carried by more selective neurons in the mushroom body. This transformation relies on a combination of oscillatory dynamics and intrinsic and circuit properties that act together to selectively filter and synthesize the output from the antennal lobe. These results provide direct support for the functional relevance of correlation codes and shed some light on the role of oscillatory synchronization in sensory networks.