To investigate factors that influence the degree of neural regeneration and recovery, we studied 2 olfactory nerve injury models. Transection of the olfactory nerves along the surface of the olfactory bulb was performed in OMP-tau-lacZ mice using either a flexible Teflon blade (mild injury) or a stainless steel blade (severe injury). Histological assessment of recovery within the olfactory bulb was made at 5, 14, and 42 days after injury. We used X-gal staining to label the degenerating and regenerating olfactory nerve fibers and immunohistochemical staining to detect the presence of reactive astrocytes and macrophages. Areas of injury-associated tissue were significantly smaller in the mild injury model, and at 42 days, the regenerated nerves had reestablished connections to the glomerular layer of the bulb. With severe injury, there were larger areas of injury-associated tissue, more astrocytes and macrophages, and a decrease in regenerated nerve fibers. When dexamethasone (DXM) was injected after severe injury, there was a significant reduction in injury-associated tissue, better nerve recovery, and fewer astrocytes and macrophages. These results demonstrate that recovery in the olfactory system varies with the severity of injury and that DXM treatment may have therapeutic value by reducing injury-associated tissue and improving recovery outcome.