The present study was meant to distinguish between unconscious and conscious olfactory information processing and to investigate the influence of olfaction on word information processing. Magnetic field changes were recorded in healthy young participants during deep encoding of visually presented words whereby some of the words were randomly associated with an odor. All recorded data were then split into two groups. One group consisted of participants who did not consciously perceive the odor during the whole experiment whereas the other group did report continuous conscious odor perception. The magnetic field changes related to the condition 'words without odor' were subtracted from the magnetic field changes related to the condition 'words with odor' for both groups. First, an odor-induced effect occurred between about 200 and 500 ms after stimulus onset which was similar in both groups. It is interpreted to reflect an activity reduction during word encoding related to the additional olfactory stimulation. Second, a later effect occurred between about 600 and 900 ms after stimulus onset which differed between the two groups. This effect was due to higher brain activity related to the additional olfactory stimulation. It was more pronounced in the group consisting of participants who consciously perceived the odor during the whole experiment as compared to the other group. These results are interpreted as evidence that the later effect is related to conscious odor perception whereas the earlier effect reflects unconscious olfactory information processing. Furthermore, our study provides evidence that only the conscious perception of an odor which is simultaneously presented to the visual presentation of a word reduces its chance to be subsequently recognized.