The olfactory system has evolved over hundreds of millions of years to perform odor recognition and discrimination across a large range of odor concentrations. One problem that is not well understood is how activity propagates and is modulated at the first synaptic transformation. The first olfactory relay of most organisms receives input from odorant receptor neurons (ORNs), whereby ORNs expressing a given odorant receptor send axons to a specific stereotyped glomerulus. ORNs synapse onto second order neurons that propagate olfactory information to higher brain areas. A hallmark of the first olfactory relay, is the presence of GABAergic local interneurons as well as a number of neuromodulators. We have therefore investigated how different components of the early olfactory circuit contribute to the olfactory representation and odor-driven behavior in Drosophila. We have asked three primary questions. 1) Is there lateral excitation between glomeruli? Using receptor gene mutations to silence ORN input to a given glomerulus, we observed that the projection neurons (PNs) of the same glomerulus have dramatically reduced odor-evoked action potentials. Thus, ORNs are the main drivers of PNs and lateral excitation is minor and potentially a modulatory mechanism. 2) How is gain control achieved in the antennal lobe? We found that the GABAB receptor is expressed in the presynaptic terminal of ORNs and mediates a feedback gain control of the early olfactory circuit. This gain control is important for pheromone-mediated mate localization. 3) Does internal state shape olfactory processing? We have found that starvation alters olfactory representation by upregulation of a neuropeptide receptor in select ORNs, which mediates starvation-dependent presynaptic facilitation. This neuropeptide signaling is important for starvation-dependent food search behavior. Together, these findings reveal how information propagates through the first olfactory relay and how it can be modulated to enhance odor-driven behavior