The olfactory epithelium (OE) is not solely exposed to odorants, but also to cell damaging substances and pathogens in the inhaled air and therefore it has to undergo lifelong renewal. Ongoing neurogenesis was shown to be dependent on the chemokine receptor CXCR4, expressed by the globose basal cells and neuronal progenitor cells (Senf et al. 2021). By using immunofluorescent staining, we demonstrate here that tight regulation of the CXCR4-ligand CXCL12 by horizontal basal cells and sustentacular cells is crucial to maintain homeostasis of tissue regeneration. Horizontal basal cells accumulate CXCL12 at the cell surface due to heparan sulfate expression and stimulate the CXCR4-expressing cells within the OE. Using a knock-out mouse model lacking the heparan sulfate degrading enzyme alpha-L-Iduronidase, we show that over accumulation of CXCL12 led to increased activation and thereby downregulation of CXCR4. Additionally, CXCL12 abundance was regulated by sustentacular cells due to the expression of CXCL12 by themselves and by expressing the scavenging receptor atypical chemokine receptor 3 (ACKR3). Absence of functional ACKR3 in sustentacular cells using different knock-out mouse models increased CXCR4 activation and promoted intracellular localization of CXCR4 close to the Golgi-apparatus. The intracellular localization of CXCR4 led to an increase in differentiation into mature neurons, also reflected by effects on distribution and morphology of the Golgi-apparatus and redistribution of the neuronal signaling proteins GAP43 and MARCKS. Conversely, we show that knocking-out CXCL12 expression in sustentacular cells reversed the effect of intracellular clustering of CXCR4 and led to decreased neuronal differentiation. Together, our data reveal a critical role of the extracellular CXCL12 availability for intracellular localization of CXCR4, and its importance for proliferation and differentiation of neuronal stem cells in the OE. The study was supported by the DFG.