Nonaxial mesenchymal/epithelial (M/E) induction guides peripheral olfactory pathway differentiation using cellular and molecular mechanisms similar to those in the developing limbs, aortic arches, and branchial arches. At each of these bilaterally symmetric sites off the midline axis, a thickened ectodermal epithelium is apposed to a specialized mesenchyme derived largely, but not exclusively, from the neural crest. The capacity of M/E interaction in the olfactory primordia (the combined olfactory placodal epithelium and adjacent mesenchyme) to induce a distinct class of sensory receptor neurons—olfactory receptor neurons—suggests that this mechanism has been modified to accommodate neurogenesis, neurite outgrowth, and axon guidance, in addition to musculoskeletal differentiation, chondrogenesis, and vasculogenesis. Accordingly, although the olfactory primordia share signaling molecules and transcriptional regulators with other bilaterally symmetric, nonaxial sites such as limb buds, their activity may be adapted to mediate distinct aspects of cellular differentiation and process outgrowth during the initial assembly of a sensory pathway—the primary olfactory pathway—during early forebrain development. Developmental Dynamics 234:464–481, 2005. © 2005 Wiley-Liss, Inc.