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Olfactory dysfunction is recognised across an ever broadening spectrum of neuropsychiatric conditions including central nervous system (CNS) demyelinating diseases such as multiple sclerosis (MS) and neuromyelitis optica (NMO). In this review, we unravel the striking evidence highlighting how olfactory loss is a common clinical feature in MS and NMO. We provide an overview of the supportive psychophysical, electrophysiological, radiological and pathological data that point to the anatomical substrate of olfactory deficits in these diseases. The pattern of underlying pathology affecting the olfactory system is shown to be complex, involving multiple structures that are affected in different ways throughout the course of the disease. This review is the first to synthesise the expanding body of literature on the topic, provides novel insight into the way in which the olfactory system is affected in CNS demyelinating diseases, and raises intriguing questions about the role of this system in the pathogenesis of these diseases.