The first step in olfactory sensation involves the binding of odorant molecules to specific receptor proteins on the ciliary surface of olfactory receptor cells (ORCs). Odorant receptors coupled to G-proteins activate adenylyl cyclase leading to the generation of cAMP, which directly gates a cyclic nucleotide-gated cationic channel in the ciliary membrane. This initial excitation causes a slow and graded depolarizing voltage change, which is encoded into a train of action potentials. Action potentials of ORCs are generated by voltage-gated Na- currents and T-type Ca2- currents in the somatic membrane. Isolated ORCs that have lost their cilia during the dissociation procedure are known to exhibit spike frequency accommodation by injecting the steady current. This raises the possibility that somatic ionic channels in ORCs may serve for odor adaptation at the level of spike encoding, although odor adaptation is mainly accomplished by the ciliary transduction machinery. This review discusses current knowledge concerning the mechanisms of spike generation in ORCs. It also reviews how neurotransmitters and hormones modulate ionic currents and action potentials in ORCs.