Objectives The objective of the present study was to investigate the usefulness of time-frequency analysis (TFA) of olfactory-induced EEG change with a low-cost, portable olfactometer in the clinical investigation of smell function. Materials & methods A total of 78 volunteers participated. The study was composed of three parts where olfactory stimuli were presented using a custom-built olfactometer. Part I was designed to optimize the stimulus as well as the recording conditions. In part II EEG-power changes after olfactory/trigeminal stimulation were compared between healthy participants and patients with olfactory impairment. In Part III the test-retest reliability of the method was evaluated in healthy subjects. Results Part I indicated that the most effective paradigm for stimulus presentation was cued stimulus, with an interstimulus interval of 18-20s at a stimulus duration of 1000ms with each stimulus quality presented 60 times in blocks of 20 stimuli each. In Part II we found that central processing of olfactory stimuli analyzed by TFA differed significantly between healthy controls and patients even when controlling for age. It was possible to reliably distinguish patients with olfactory impairment from healthy individuals at a high degree of accuracy (healthy controls vs anosmic patients: sensitivity 75%; specificity 89%). In addition we could show a good test-retest reliability of TFA of chemosensory induced EEG-power changes in Part III. Conclusions Central processing of olfactory stimuli analyzed by TFA reliably distinguishes patients with olfactory impairment from healthy individuals at a high degree of accuracy. Importantly this can be achieved with a simple olfactometer.