Geosmin is an odorant produced by bacteria e.g. in moist soil. It has been found to be of extraordinary relevance to some insects, although for different reasons. Here we report the first tests on the effect of geosmin on honey bees. Behavioural experiments have shown that in bees exposed to the alarm pheromone component isoamyl acetate (IAA), geosmin strongly suppresses the defence behaviour, although, surprisingly, only at very low concentrations of geosmin. Electroantennography and antennal lobe (AL) calcium imaging provided insights into the underlying mechanisms. At the level of the olfactory receptor neurons, responses to mixtures of geosmin and IAA were lower than to pure IAA, suggesting an interaction of both compounds at the receptor level. In the AL, geosmin elicited a broad activity pattern but with decreasing amplitudes as concentration increases, which again correlates 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. Finally, we speculate on a potential ecological relevance.