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We report a comprehensive comparative analysis of human and mouse olfactory receptor (OR) genes. The OR family is the largest mammalian gene family known. We identify approximately 93% of an estimated 1500 mouse ORs, exceeding previous estimates and the number of human ORs by 50%. Only 20% are pseudogenes, giving a functional OR repertoire in mice that is three times larger than that of human. The proteins encoded by intact human ORs are less highly conserved than those of mouse, in patterns that suggest that even some apparently intact human OR genes may encode non-functional proteins. Mouse ORs are clustered in 46 genomic locations, compared to a much more dispersed pattern in human. We find orthologous clusters at syntenic human locations for most mouse genes, indicating that most OR gene clusters predate primate-rodent divergence. However, many recent local OR duplications in both genomes obscure one-to-one orthologous relationships, thereby complicating cross-species inferences about OR-ligand interactions. Local duplications are the major force shaping the gene family. Recent interchromosomal duplications of ORs have also occurred, but much more frequently in human than in mouse. In addition to clarifying the evolutionary forces shaping this gene family, our study provides the basis for functional studies of the transcriptional regulation and ligand-binding capabilities of the OR gene family.