The olfactory system in rodents serves a critical function in social, reproductive and survival behaviours. Processing of chemosensory signals in the brain is dynamically regulated in part by an animal's physiological state. We previously reported that type 3 muscarinic acetylcholine receptors (M3-Rs) physically interact with odorant receptors (ORs) to promote odour-induced responses in a heterologous expression system. However, it is not known how M3-Rs affect the ability of olfactory sensory neurons (OSNs) to respond to odours. Here, we show that an M3-R antagonist attenuates odour-induced responses in OSNs from wild-type, but not M3-R-null, mice. Using a novel molecular assay, we demonstrate that the activation of M3-Rs inhibits the recruitment of β-arrestin-2 to ORs, resulting in a potentiation of odour-induced responses in OSNs. These results suggest a role for acetylcholine in modulating olfactory processing at the initial stages of signal transduction in the olfactory system.