Considerable progress has been made in the understanding of transduction mechanisms in olfactory receptor neurons (ORNs) over the last decade. Odorants pass through a mucus interface before binding to odorant receptors (ORs). The molecular structure of many ORs is now known. They belong to the large class of G protein-coupled receptors with seven transmembrane domains. Binding of an odorant to an OR triggers the activation of second messenger cascades. One second messenger pathway in particular has been extensively studied; the receptor activates, via the G protein Golf, an adenylyl cyclase, resulting in an increase in adenosine 3',5'-cyclic monophosphate (cAMP), which elicits opening of cation channels directly gated by cAMP. Under physiological conditions, Ca2+ has the highest permeability through this channel, and the increase in intracellular Ca2+ concentration activates a Cl- current which, owing to an elevated reversal potential for Cl-, depolarizes the olfactory neuron. The receptor potential finally leads to the generation of action potentials conveying the chemosensory information to the olfactory bulb. Although much less studied, other transduction pathways appear to exist, some of which seem to involve the odorant-induced formation of inositol polyphosphates as well as Ca2+ and/or inositol polyphosphate -activated cation channels. In addition, there is evidence for odorant-modulated K+ and Cl- conductances. Finally, in some species, ORNs can be inhibited by certain odorants. This paper presents a comprehensive review of the biophysical and electrophysiological evidence regarding the transduction processes as well as subsequent signal processing and spike generation in ORNs.