The olfactory EEG of awake animals displays oscillatory bursts of activity in the gamma- (30-100 Hz) range. The bursts are correlated with inflow of air over the receptor layer in the nose. None of the inputs to the cortices that display these oscillations carries periodic signals in the gamma-range. Thus these bursts are generated locally, either by neuronal feedback interactions or by coupling of oscillatory neurons. In the first case if the oscillations are generated by negative feedback, then two classes of cells must exist: excitatory neurons and inhibitory neurons with the same frequency of oscillation but with a quarter cycle phase lag by the inhibitory cells from the excitatory cells. On the other hand, if the EEG's result from coupling of cells that are intrinsically oscillatory, there should be a broad but monomodal distribution of phase values. In order to determine the origin of these bursts, we performed simultaneous recordings of EEG and multi-unit spikes in the 4 parts of the olfactory system (olfactory bulb, anterior olfactory nucleus, prepyriform cortex and lateral entorhinal area) of awake and motivated rats. For each sample, the EEG and the multi-unit spikes were recorded from the same local neighborhood. The multi-unit electrode recorded pulses from the principal output neurons of the respective cortical areas. In all locations tested, the oscillations in pulse probabilities of firing were found to have the same frequency as the dominant EEG frequency. In all 4 structures two sets of cells were found. One set displayed pulses in phase with the EEG and the other set displayed pulses that led or lagged the EEG by approximately 1/4 cycle. These data confirm the negative feedback interaction model rather than the coupled oscillator model for the generation of the bursts in the olfactory system. The relevance of these findings to other cortical systems, in casu the visual cortex is discussed.