The functional expression of olfactory receptors (ORs) is a primary requirement to examine the molecular mechanisms of odorant perception and coding. Functional expression of the rat I7 OR and its trafficking to the plasma membrane was achieved under optimized experimental conditions in the budding yeast Saccharomyces cerevisiae. The membrane expression of the receptor was shown by Western blotting and immunolocalization methods. Moreover, we took advantage of the functional similarities between signal transduction cascades of G protein-coupled receptor in mammalian cells and the pheromone response pathway in yeast to develop a novel biosensor for odorant screening using luciferase as a functional reporter. Yeasts were engineered to coexpress I7 OR and mammalian G(alpha) subunit, to compensate for the lack of endogenous Gpa1 subunit, so that stimulation of the receptor by its ligands activates a MAP kinase signaling pathway and induces luciferase synthesis. The sensitivity of the bioassay was significantly enhanced using mammalian G(olf) compared to the G(alpha15) subunit, resulting in dose-dependent responses of the system. The biosensor was probed with an array of odorants to demonstrate that the yeast-borne I7 OR retains its specificity and selectivity towards ligands. The results are confirmed by functional expression and bioluminescence response of human OR17-40 to its specific ligand, helional. Based on these findings, the bioassay using the luciferase reporter should be amenable to simple, rapid and inexpensive odorant screening of hundreds of ORs to provide insight into olfactory coding mechanisms.