Olfaction begins with the transduction of the information carried by odor molecules into electrical signals in sensory neurons. The activation of different subsets of sensory neurons to different degrees is the basis for neural encoding and further processing of the odor information by higher centers in the olfactory pathway. Recent evidence has converged on a set of transduction mechanisms, involving G-protein-coupled second-messenger systems, and neural processing mechanisms, involving modules called glomeruli, that appear to be adapted for the requirements of different species. The evidence is highlighted in this review by focusing on studies in selected vertebrates and in insects and crustaceans among invertebrates. The findings support the hypothesis that olfactory transduction and neural processing in the peripheral olfactory pathway involve basic mechanisms that are universal across most species in most phyla.