Stem cell-based therapies have been proposed as a strategy to replace damaged tissues, especially in the nervous system. A primary sensory modality, olfaction, is impaired in 12% of the US population, but lacks treatment options. We report here the development of a novel mouse model of inducible hyposmia and demonstrate that purified tissue-specific stem cells delivered intranasally engraft to produce olfactory neurons, achieving recovery of function. Adult mice were rendered hyposmic by conditional deletion of the ciliopathy-related IFT88 gene in the olfactory sensory neuron lineage and following experimentally induced olfactory injury, received either vehicle or stem cell infusion intranasally. Engraftment-derived olfactory neurons were identified histologically, and functional improvements were measured via electrophysiology and behavioral assay. We further explored mechanisms in culture that promote expansion of engraftment-competent adult olfactory basal progenitor cells. These findings provide a basis for translational research on propagating adult tissue-specific sensory progenitor cells and testing their therapeutic potential.