Inflammatory sinus and nasal disease is a common cause of human olfactory loss. To explore the mechanisms underlying rhinosinusitis-associated olfactory loss, we have generated a transgenic mouse model of olfactory inflammation, in which tumor necrosis factor alpha (TNF-alpha) expression is induced in a temporally controlled manner specifically within the olfactory epithelium (OE). Like the human disease, TNF-alpha expression leads to a progressive infiltration of inflammatory cells into the OE. Using this model, we have defined specific phases of the pathologic process. An initial loss of sensation without significant disruption is observed, followed by a striking reorganization of the sensory neuroepithelium. An inflamed and disrupted state is sustained chronically by continued induction of cytokine expression. After prolonged maintenance in a deficient state, there is a dramatic recovery of function and a normal histologic appearance when TNF-alpha expression is extinguished. Although obstruction of airflow is also a contributing factor in human rhinosinusitis, this in vivo model demonstrates for the first time that direct effects of inflammation on OE structure and function are important mechanisms of olfactory dysfunction. These features mimic essential aspects of chronic rhinosinusitis-associated olfactory loss, and illuminate underlying cellular and molecular aspects of the disease. This manipulable model also serves as a platform for developing novel therapeutic interventions.