Geosmin is an odorant produced by bacteria in moist soil. It has been found to be extraordinarily relevant to some insects, but the reasons for this are not yet fully understood. Here we report the first tests of the effect of geosmin on honey bees. A stinging assay showed that the defensive behaviour elicited by the bee's alarm pheromone component isoamyl acetate (IAA) is strongly suppressed by geosmin. Surprisingly, the suppression is, however, only present at very low geosmin concentrations, and disappears at higher concentrations. We investigated the underlying mechanisms at the level of the olfactory receptor neurons by means of electroantennography, finding the responses to mixtures of geosmin and IAA to be lower than to pure IAA, suggesting an interaction of both compounds at the olfactory receptor level. Calcium imaging of the antennal lobe (AL) revealed that neuronal responses to geosmin decreased with increasing concentration, correlating well with the observed behaviour. Computational modelling of odour transduction and coding in the AL suggests that a broader activation of olfactory receptor types by geosmin in combination with lateral inhibition could lead to the observed non-monotonic increasing-decreasing responses to geosmin and thus underlie the specificity of the behavioural response to low geosmin concentrations.