Olfactory receptor neurons (ORNs) employ a cyclic nucleotide-gated (CNG) channel to generate a receptor current in response to an odorant-induced rise in cAMP. This channel contains three types of subunits, the principal CNGA2 subunit and two modulatory subunits (CNGA4 and CNGB1b). Here, we have analyzed the functional relevance of CNGB1 for olfaction by gene targeting in mice. Electro-olfactogram responses of CNGB1-deficient (CNGB1-/-) mice displayed a reduced maximal amplitude and decelerated onset and recovery kinetics compared with wild-type mice. In a behavioral test, CNGB1-/- mice exhibited a profoundly decreased olfactory performance. Electrophysiological recordings revealed that ORNs of CNGB1-/- mice weakly expressed a CNG current with decreased cAMP sensitivity, very rapid flicker-gating behavior and no fast modulation by Ca2+-calmodulin. Co-immunoprecipitation confirmed the presence of a CNGA2/CNGA4 channel in the olfactory epithelium of CNGB1-/- mice. This CNGA2/CNGA4 channel was targeted to the plasma membrane of olfactory knobs, but failed to be trafficked into olfactory cilia. Interestingly, we observed a similar trafficking defect in mice deficient for the CNGA4 subunit. In conclusion, these results demonstrate that CNGB1 has a dual function in vivo. First, it endows the olfactory CNG channel with a variety of biophysical properties tailored to the specific requirements of olfactory transduction. Second, together with the CNGA4 subunit, CNGB1 is needed for ciliary targeting of the olfactory CNG channel.