Olfactory adaptation, characterized by attenuation of response to repeated odor stimulations or continuous odor exposure, is an intrinsic feature of olfactory processing. Adaptation can be induced by either “synaptic depression” due to depletion of neurotransmitters, or “enhanced inhibition” onto principle neurons by local inhibitory interneurons in olfactory structures. It is not clear which mechanism plays a major role in olfactory adaptation. More importantly, molecular sources of enhanced inhibition have not been identified. In this study, olfactory responses to either repeated 40-s stimulations with interstimulus intervals (ISI) of 140-s or 30-min, or a single prolonged 200-s stimulus were measured by fMRI in different naïve rats. Olfactory adaptations in the olfactory bulb (OB), anterior olfactory nucleus (AON), and piriform cortex (PC) were observed only with repeated 40-s odor stimulations, and no olfactory adaptations were detected during the prolonged 200-s stimulation. Interestingly, in responses to repeated 40-s odor stimulations in the PC, the first odor stimulation induced positive activations, and odor stimulations under adapted condition induced negative activations. The negative activations suggest that “sparse coding” and “global inhibition” are the characteristics of olfactory processing in PC, and the global inhibition manifests only under an adapted condition, not a naïve condition. Further, we found that these adaptations were NMDA receptor dependent; an NMDA receptor antagonist (MK801) blocked the adaptations. Based on the mechanism that glutamate NMDA receptor plays a role in the inhibition onto principle neurons by interneurons, our data suggest that the olfactory adaptations are caused by enhanced inhibition from interneurons. Combined with the necessity of the interruption of odor stimulation to observe the adaptations, the molecular source for the enhanced inhibition is most likely an increased glutamate release from presynaptic terminals due to glutamate over-replenishment during the interruption of odor stimulation. Furthermore, with blockage of the adaptations, the data reveal that orbital, medial & prefrontal, and cingulate cortices (OmPFC) are involved in the olfactory processing.