Smell deficits and neurobiological changes in the olfactory bulb (OB) and olfactory epithelium (OE) have been observed in schizophrenia and related disorders. The OE is the most peripheral olfactory system located outside the cranium, and is connected with the brain via direct neuronal projections to the OB. Nevertheless, it is unknown whether and how a disturbance of the OE affects the OB in schizophrenia and related disorders. Addressing this gap would be the first step in studying the impact of OE pathology in the disease pathophysiology in the brain. In this cross-species study, we observed that chronic, local OE inflammation with a set of upregulated genes in an inducible olfactory inflammation (IOI) mouse model led to a volume reduction, layer structure changes, and alterations of neuron functionality in the OB. Furthermore, IOI model also displayed behavioral deficits relevant to negative symptoms (avolition) in parallel to smell deficits. In first episode psychosis (FEP) patients, we observed a significant alteration in immune/inflammation-related molecular signatures in olfactory neuronal cells (ONCs) enriched from biopsied OE and a significant reduction in the OB volume, compared with those of healthy controls (HC). The increased expression of immune/inflammation-related molecules in ONCs was significantly correlated to the OB volume reduction in FEP patients, but no correlation was found in HCs. Moreover, the increased expression of human orthologues of the IOI genes in ONCs was significantly correlated with the OB volume reduction in FEP, but not in HCs. Together, our study implies a potential mechanism of the OE-OB pathology in patients with psychotic disorders (schizophrenia and related disorders). We hope that this mechanism may have a cross-disease implication, including COVID-19-elicited mental conditions that include smell deficits.