Abstract Odour representations are established in the olfactory bulb by a fine balance of excitatory and inhibitory activity. The projection neurons of the olfactory bulb, the mitral and tufted cells then pass this information to the olfactory cortices. While bulbar circuits have been studied at the neural and synaptic level, relatively little is known about the activity‐dependent gene transcription machinery that shapes connectivity of mitral/tufted cells and thereby discriminative bulbar odour representations. As a first step, we conditionally deleted a candidate gene involved in synaptic wiring selectively in mitral and tufted cells during embryonic development and performed single‐cell recordings in the olfactory bulb and the anterior olfactory nucleus of adult awake mice. We found that the activity‐dependent transcription factor NPAS4 is necessary to establish temporally precise odour responses and normotypic levels of odour‐inhibited responses in the adult olfactory bulb. The altered bulbar odour representations in NPAS4 mutants still contain information about odour identity, but show impaired coding of chemical similarity. Interestingly, odour responses in the cortex of NPAS4 mutants lose their robust decoding of different aldehydes. In summary, we identify NPAS4 as a factor in olfactory bulb projection neurons that is required for the formation of coordinated excitation‐inhibition patterns and distinct representations of chemically similar stimuli to extract odour identity in the cortex. NPAS4 is part of a network of autism candidate genes. Considering this, these findings may contribute to a better understanding how alterations in synaptic wiring may contribute to the burden of neurodevelopmental disorders in the perceptual domain. image Key points Chemically similar odour molecules generate different perceptual objects. The first processing station of odours, the olfactory bulb, produces highly discriminable representations of similar molecules for downstream cortical decoding. Inhibitory inputs to olfactory bulb projection neurons shape such discriminable representations. We tested how conditional deletion of the activity‐dependent transcription factor NPAS4 in mitral/tufted cells affects bulbar and cortical odour representations. In single‐unit recordings of adult awake mice, mutants had impaired odour‐inhibited responses and blurred odour‐excited responses in the bulb. While only decoding of chemical similarity was lost in the bulb, discriminative cortical decoding broke down more generally. These findings reveal functions of bulbar inhibition for cortical decoding and candidate mechanisms for autism‐related genes in sensory dysfunction already in early sensory regions.