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Marked olfactory dysfunction (hyposmia) is a frequent and early abnormality in Parkinson's disease. We review recent advances related to its cause and its clinical relevance with respect to the differential diagnosis of Parkinsonian syndromes.Marked olfactory dysfunction occurs in Parkinson's disease and dementia with Lewy bodies but is not found in progressive supranuclear palsy and corticobasal degeneration. In multiple system atrophy, the deficit is mild and indistinguishable from cerebellar syndromes of other aetiologies, including the spino-cerebllar ataxias. This is in keeping with evidence of cerebellar involvement in olfactory processing, which may also help to explain recent findings of mild olfactory dysfunction in essential tremor. Smell testing remains, however, a clinically relevant tool in the differential diagnosis of indeterminate tremors. Intact olfaction has also been reported recently in Parkin disease (PARK 2) and vascular Parkinsonism. The relevance of sniffing ability to olfaction and a possible role of increased tyrosine hydroxylase and dopamine in parts of the olfactory bulb are issues of current interest with respect to pathophysiology. The early or ‘pre-clinical’ detection of Parkinson's disease is increasingly recognized as an area in which olfactory testing may be of value.Research findings have confirmed a role for olfactory testing in the differential diagnosis of movement disorders, and suggest that this approach is currently underused in clinical practice. Validated test batteries are now available that may prove to be of practical use in the differential diagnosis of Parkinsonian syndromes and indeterminate tremors.