In the mushroom bodies (MBs) of Drosophila, an analogue of the mammalian olfactory cortex, olfactory stimuli are sparsely encoded by Kenyon cells (KCs) that exhibit a high level of odor selectivity. Sparse coding of olfactory stimuli has significant advantages for maximizing the discrimination power and storage capacity of MBs. The inhibitory gamma-aminobutyric acid (GABA) system is important for regulating information processing in MBs, but its specific role in the sparse coding of odors is unclear. In this study, we investigated the role of the GABA system in the sparse coding of odors using an in vivo calcium imaging strategy, which allowed us to measure the activity of the KC population at single cell resolution while the components of the GABA system were genetically manipulated. We found that the down-regulation of GABA(A) but not GABA(B) receptors in KCs reduced the sparseness of odor representations in the MB, as shown by an increase in the population response probability and decrease in the odor selectivity of single KCs. Furthermore, the down-regulation of GABA synthesis in a pair of large GABAergic neurons innervating the entire MB reduced the sparseness of odor representations in KCs. In conclusion, the sparse coding of odors in MBs is regulated by a pair of GABAergic neurons through the GABA(A) receptors on KCs, thus demonstrating a specific role of the inhibitory GABA system on information processing in the MB. (c) 2013 Elsevier Inc. All rights reserved.