ABSTRACT In the Drosophila antenna, different subtypes of olfactory receptor neurons (ORNs) housed in the same sensory hair (sensillum) can inhibit each other non-synaptically. However, the mechanisms underlying this unusual form of lateral inhibition remain unclear. Here we use recordings from pairs of sensilla impaled by the same tungsten electrode to prove that direct electrical (“ephaptic”) interactions mediate lateral inhibition between ORNs. Intriguingly, within individual sensilla, we find that ephaptic lateral inhibition is asymmetric such that one ORN exerts greater influence onto its neighbor. Serial block-face scanning electron microscopy of genetically identified ORNs and circuit modeling indicate that asymmetric lateral inhibition reflects a surprisingly simple mechanism: the physically larger ORN in a pair corresponds to the dominant neuron in ephaptic interactions. Thus, morphometric differences between compartmentalized ORNs account for highly specialized inhibitory interactions that govern information processing at the earliest stages of olfactory coding.