The prion protein PrP(C) is infamous for its role in disease, but its normal physiological function remains unknown. Here we found a previously unknown behavioral phenotype of Prnp(-/-) mice in an odor-guided task. This phenotype was manifest in three Prnp knockout lines on different genetic backgrounds, which provides strong evidence that the phenotype is caused by a lack of PrP(C) rather than by other genetic factors. Prnp(-/-) mice also showed altered behavior in a second olfactory task, suggesting that the phenotype is olfactory specific. Furthermore, PrP(C) deficiency affected oscillatory activity in the deep layers of the main olfactory bulb, as well as dendrodendritic synaptic transmission between olfactory bulb granule and mitral cells. Notably, both the behavioral and electrophysiological alterations found in Prnp(-/-) mice were rescued by transgenic neuronal-specific expression of PrP(C). These data suggest that PrP(C) is important in the normal processing of sensory information by the olfactory system.