Local interneurons are essential in information processing by neural circuits. Here we present a comprehensive genetic, anatomical and electrophysiological analysis of local interneurons (LNs) in the Drosophila melanogaster antennal lobe, the first olfactory processing center in the brain. We found LNs to be diverse in their neurotransmitter profiles, connectivity and physiological properties. Analysis of >1,500 individual LNs revealed principal morphological classes characterized by coarsely stereotyped glomerular innervation patterns. Some of these morphological classes showed distinct physiological properties. However, the finer-scale connectivity of an individual LN varied considerably across brains, and there was notable physiological variability within each morphological or genetic class. Finally, LN innervation required interaction with olfactory receptor neurons during development, and some individual variability also likely reflected LN-LN interactions. Our results reveal an unexpected degree of complexity and individual variation in an invertebrate neural circuit, a result that creates challenges for solving the Drosophila connectome.