The very high sensitivity and specificity of odor identification tasks in discriminating between Alzheimer's patients and normals suggests that they reflect the presence of underlying neuropathology. Significant neuropathological changes are seen in areas critical to processing olfactory information, even in the early stages of Alzheimer's disease (AD). The current study was designed to investigate whether performance on olfactory tasks (odor threshold and odor identification) was related to volumetric MRI measures of mesial temporal areas central to olfactory information processing and important in the neuropathology of AD. Participants were 8 male and 5 female patients with probable AD, and 10 male and 12 female normal age-matched controls, diagnosed at the UCSD Alzheimer's Disease Research Center. The study investigated correlations between volumetric measures of hippocampus, the parahippocampal gyrus and the amygdala, and the psychophysical measures of olfactory function. Robust relationships were observed between mesial temporal lobe volumes and olfactory functional measures. The finding of a strong relationship between left hippocampal volume and performance on the odor identification task (r = .85) is compatible with a left-hemisphere superiority for verbally mediated olfactory tasks. The findings suggest a neural substrate for the breakdown in functional performance on verbally mediated odor identification tasks in Alzheimer's disease and suggest the utility of quantitative MRI measures and psychophysical performance in the assessment of AD. These results support the potential clinical utility of inclusion of odor identification tests in diagnostic batteries for detecting AD.