Chemosensory neurons translate perception of external chemical cues, including odorants, tastants, and pheromones, into information that drives attraction or avoidance motor programs. In the laboratory, robust behavioral assays, coupled with powerful genetic, molecular and optical tools, have made Caenorhabditis elegans an ideal experimental system in which to dissect the contributions of individual genes and neurons to ethologically relevant chemosensory behaviors. Here, we review current knowledge of the neurons, signal transduction molecules and regulatory mechanisms that underlie the response of C. elegans to chemicals, including pheromones. The majority of identified molecules and pathways share remarkable homology with sensory mechanisms in other organisms. With the development of new tools and technologies, we anticipate that continued study of chemosensory signal transduction and processing in C. elegans will yield additional new insights into the mechanisms by which this animal is able to detect and discriminate among thousands of chemical cues with a limited sensory neuron repertoire.