The olfactory bulb (OB) receives odor information from the olfactory epithelium and relays this to the olfactory cortex. Using a mouse model, we found that development and maturation of OB interneurons depends on the zinc finger homeodomain factor teashirt zinc finger family member 1 (TSHZ1). In mice lacking TSHZ1, neuroblasts exhibited a normal tangential migration to the OB; however, upon arrival to the OB, the neuroblasts were distributed aberrantly within the radial dimension, and many immature neuroblasts failed to exit the rostral migratory stream. Conditional deletion of Tshz1 in mice resulted in OB hypoplasia and severe olfactory deficits. We therefore investigated olfaction in human subjects from families with congenital aural atresia that were heterozygous for TSHZ1 loss-of-function mutations. These individuals displayed hyposmia, which is characterized by impaired odor discrimination and reduced olfactory sensitivity. Microarray analysis, in situ hybridization, and ChIP revealed that TSHZ1 bound to and regulated expression of the gene encoding prokineticin receptor 2 (PROKR2), a G protein–coupled receptor essential for OB development. Mutations in PROKR2 lead to Kallmann syndrome, characterized by anosmia and hypogonadotrophic hypogonadism. Our data indicate that TSHZ1 is a key regulator of mammalian OB development and function and controls the expression of molecules involved in human Kallmann syndrome.