The granule cell of the olfactory bulb was first described by Golgi in 1875 and Cajal and his contemporaries in the 1890s as an enigmatic cell without an axon, whose status as a nerve cell was questionable. Insight into its functions began in the 1960s with evidence that it acted as an interneuron to mediate powerful inhibition of mitral cells. The circuit was found to involve dendrodendritic synapses for activation by mitral cell lateral dendrites of the granule cell dendritic spines and inhibition of the same and neighboring mitral cell lateral dendrites. Subsequent studies established the roles of glutamatergic receptors and GABAergic receptors in this circuit. The lateral inhibition is believed to be involved in contrast enhancement between mitral cells responding to different odor molecules. Current studies are analysing how the lateral inhibition can be mediated over arbitrary distances between columns of granule cells through action potential propagation in the mitral cell secondary dendrites. Among other important properties, granule cells undergo neurogenesis from precursor cells throughout adult life. This originally enigmatic cell thus appears to play a critical role in olfactory processing.