Odors affect the excitability of an olfactory neuron by altering membrane conductances at the ciliated end of a single, long dendrite. One mechanism to increase the sensitivity of olfactory neurons to odorants would be for their dendrites to support action potentials. We show for the first time that isolated olfactory dendrites from the mudpuppy Necturus maculosus contain a high density of voltage-activated Na+ channels and produce Na-dependent action potentials in response to depolarizing current pulses. Furthermore, all required steps in the transduction process beginning with odor detection and culminating with action potential initiation occur in the ciliated dendrite. We have previously shown that odors can modulate Cl- and K+ conductances in intact olfactory neurons, producing both excitation and inhibition. Here we show that both conductances are also present in the isolated, ciliated dendrite near the site of odor binding, that they are modulated by odors, and that they affect neuronal excitability. Voltage-activated Cl- currents blocked by 4,4'-diisothiocyanatostilbene-2,2' disulfonic acid and niflumic acid were found at greater than five times higher average density in the ciliated dendrite than in the soma, whereas voltage-activated K+ currents inhibited by intracellular Cs+ were distributed on average more uniformly throughout the cell. When ciliated, chemosensitive dendrites were stimulated with the odorant taurine, the responses were similar to those seen in intact cells: Cl- currents were increased in some dendrites, whereas in others Cl- or K+ currents were decreased, and responses washed out during whole-cell recording. The Cl- equilibrium potential for intact neurons bathed in physiological saline was found to be -45 mV using an on-cell voltage-ramp protocol and delayed application of channel blockers. We postulate that transduction of some odors is caused by second messenger-mediated modulation of the resting membrane conductance (as opposed to a specialized generator conductance) in the cilia or apical region of the dendrite, and show how this could alter the firing frequency of olfactory neurons.