Insects are ecologically and economically important organisms. They are pollinators, pests and vectors for many deadly human and animal diseases. Insects are highly dependent on olfaction to locate hosts, oviposition sites, and dangers. Olfactory organs are the main sensory channel through which insects obtain information regarding the external world. How chemical signals are converted into electric signals by the insect olfactory periphery is still under investigation, particularly regarding how insects have evolved such inordinate sensitivity. The main objective of this thesis was to investigate the molecular mechanism through which high sensitivity, speed and broad dynamic range is achieved by the insect olfactory periphery. To address our questions we employed biochemical, molecular, physiological and behavioral approaches. Insect sensory neurons house three different types of chemoreceptors: including odorant receptors (OR), ionotropic receptors (IR),which evolved at different time points in evolution and neurons expressing these different receptors differ in sensitivity. IR-expressing neurons, the ancestral chemoreceptors, were less sensitive as opposed to the more recently derived OR-OSNs. When intracellular signaling was inhibited in OR-OSNs they became less sensitive and showed delayed response, similar to IR-OSNs. To investigate the impact of intracellular signaling on the behavioral response to odors, we generated different mutants. Mutant flies were less sensitive and also exhibited greater response latency to odors when tested in a free flight behavioral bioassay. Our results both at the physiological and behavioral levels suggest that modulation of the OSN response by intracellular signaling is indispensable for maximum sensitivity, especially for insects tracking odor in flight. Therefore, the recent evolution of ORs may have occurred in response to the need for efficient and fast tracking of dynamic odor landscape while in flight.