The lateral entorhinal cortex (LEC) computes and transfers olfactory information from the olfactory bulb to the hippocampus. Here we established LEC connectivity to upstream and downstream brain regions to understand how the LEC processes olfactory information. We report that, in layer II (LII), reelin- and calbindin-positive (RE(+) and CB(+)) neurons constitute two major excitatory cell types that are electrophysiologically distinct and differentially connected. RE(+) neurons convey information to the hippocampus, while CB(+) neurons project to the olfactory cortex and the olfactory bulb. In vivo calcium imaging revealed that RE(+) neurons responded with higher selectivity to specific odors than CB(+) neurons and GABAergic neurons. At the population level, odor discrimination was significantly better for RE(+) than CB(+) neurons, and was lowest for GABAergic neurons. Thus, we identified in LII of the LEC anatomically and functionally distinct neuronal subpopulations that engage differentially in feedforward and feedback signaling during odor processing.