The study of the neural basis of olfaction is important both for understanding the sense of smell and for understanding the mechanisms of neural computation. In the olfactory bulb (OB), the spatial patterning of both sensory inputs and synaptic interactions is crucial for processing odor information, although this patterning alone is not sufficient. Recent studies have suggested that representations of odor may already be distributed and dynamic in the first olfactory relay. The growing evidence demonstrating a functional role for the temporal structure of bulbar neuronal activity supports this assumption. However, the detailed mechanisms underlying this temporal structure have never been thoroughly studied. Our study focused on gamma (40-100 Hz) network oscillations in the mammalian OB, which is a form of temporal patterning in bulbar activity elicited by olfactory stimuli. We used computational modeling combined with electrophysiological recordings to investigate the basic synaptic organization necessary and sufficient to generate sustained gamma rhythms. We found that features of gamma oscillations obtained in vitro were identical to those of a model based on lateral inhibition as the coupling modality (i.e., low irregular firing rate and high oscillation stability). In contrast, they differed substantially from those of a model based on lateral excitatory coupling (i.e., high regular firing rate and instable oscillations). Therefore we could precisely tune the oscillation frequency by changing the kinetics of inhibitory events supporting the lateral inhibition. Moreover, gradually decreasing GABAergic synaptic transmission decreased the degree of relay neuron synchronization in response to sensory inputs, both theoretically and experimentally. Thus we have shown that lateral inhibition provides a mechanism by which the dynamic processing of odor information might be finely tuned within the OB circuit.