Nonvisual arrestins are a family of multifunctional adaptor molecules that regulate the activities of diverse families of receptors including G protein-coupled receptors, frizzled, and transforming growth factor-beta receptors. These activities indicate broad roles in both physiology and development for nonvisual arrestins. Drosophila melanogaster has a single nonvisual arrestin, kurtz, which is found at high levels within the adult olfactory receptor neurons (ORNs), suggesting a role for this gene in modulating olfactory sensitivity. Using heat-induced expression of a krz cDNA through development, we rescued krz(1) lethality. The resulting adults lacked detectable levels of krz in the olfactory system. The rescued krz(1) homozygotes have an incompletely penetrant antennal structural defect that was completely rescued by the neural expression of a krz cDNA. The krz(1) loss-of-function adults without visible antennal defects displayed diminished behavioral responsiveness to both aversive and attractive odors and also demonstrated reduced olfactory receptor potentials. Both the behavioral and electrophysiological phenotypes were rescued by the targeted expression of the krz cDNA within postdevelopmental ORNs. Thus, krz is required within the nervous system for antennal development and is required later in the ORNs for the maintenance of olfactory sensitivity in Drosophila. The reduced receptor potentials in krz(1) antenna indicate that nonvisual arrestins are required for the early odor-induced signaling events within the ORNs.