Even though the causes of dysosmia are not yet clear, there are two general theories that describe the etiology: the peripheral and central theories. In parosmia, the peripheral theory refers to the inability to form a complete picture of an odorant due to the loss of functioning olfactory receptor neurons. The central theory refers to integrative centers in the brain forming a distorted odor. In phantosmia, the peripheral theory refers to neurons emitting abnormal signals to the brain or the loss of inhibitory cells that are normally present in normal functioning. The central theory for phantosmia is described as an area of hyper-functioning brain cells that generate the order perception. Evidence to support these theories include findings that for the majority of individuals with distortions, there is a loss of sensitivity to smell that accompanies it and the distortions are worse at the time of the decreased sensitivity. It has been reported in parosmia cases that patients can identify triggering stimuli. Common triggers include gasoline, tobacco, coffee, perfum, fruits and chocolate.

The cause of dysosmia has not been determined but there have been clinical associations with the neurological disorder:

- Upper respiratory tract infection (URTIs)

- Nasal and paranasal sinus disease

- Toxic chemical exposure

- Neurological abnormalities

- Head trauma

- Nasal surgery

- Tumors on the frontal lobe or olfactory bulb

- Epilepsy

Most of cases are described as idiopathic and the main antecedents related to parosmia are URTIs, head trauma, and nasal and paranasal sinus disease. Psychiatric causes for smell distortion can exist in schizophrenia, alcoholic psychosis, depression, and olfactory reference syndrome.

A longitudinal study on pregnant females found that 76% of pregnant females experienced significant changes in gustation and olfaction perception. This was found to be caused and linked to their pregnancy. The study concluded that 67% of the pregnant females had reported a higher level of sensitivity to smell, 17% suffered from an olfactory distortion and 14% suffered from phantosmia; these distortions were very minimal towards the last stages of pregnancy and in the majority were not present post partum. Furthermore, 26% of these participants also claimed that they also experienced an increased sensitivity to foods that were bitter and a decreased sensitivity to salt. These findings suggest that pregnant females experience distorted smell and taste perception during pregnancy. It has also been found that 75% of women alter their diets during pregnancy. Further research is being conducted to determine the mechanism behind food cravings during pregnancy.

The frequency of phantosmia is rare in comparison with the frequency of parosmia. Parosmia has been estimated to be in 10-60% of patients with olfactory dysfunction and from studies, it has been shown that it can last anywhere from 3 months to 22 years. Smell and taste problems result in over 200,000 visits to physicians annually in the US. Lately, it has been thought that phantosmia might co-occur with Parkinson's disease. However, its potential to be a premotor biomarker for Parkinson's is still up for debate as not all patients with Parkinson's disease have olfactory disorders

Phantosmia is most likely to occur in women between the ages of 15 and 30 years. The time of the first hallucination(s) lasts from anywhere from five to twenty minutes. It has also been found that the second hallucination will occur approximately a month later in the same manner as the first. Over time, the length of the hallucination will begin to increase.

One method used to establish parosmia is the University of Pennsylvania Smell Identification Test, or UPSIT. "Sniffin' Sticks" are another method that can be used to properly diagnose parosmia. These different techniques can also help deduce whether a specific case of parosmia can be attributed to just one stimulating odor or if there is a group of stimulating odors that will generate the displaced smell. One case study performed by Frasnelli "et al." offers a situation where certain smells, specifically coffees, cigarettes, onions, and perfumes, induced a "nauseating" odor for the patient, one which was artificial but unable to be aptly related to another known smell. In another case study cited in the same paper, one woman had parosmia in one nostril but not the other. Medical examinations and MRIs did not reveal any abnormalities; however the parosmia in this case was degenerative and only got worse with time. The authors do comment, however, that cases of parosmia can predict regeneration of olfactory senses.

There are numerous diseases that parosmia is associated with. In the case study cited above, Frasnelli "et al." examined five patients that endured parosmia or phantosmia, most as a result of upper respiratory tract infections (URTIs). It is hypothesized that URTIs can result in parosmia because of damage to olfactory receptor neurons (ORNs).

Exposure to harmful solvents has also been linked to parosmia and more specifically damaging ORNs.

Damage to these neurons could end in the inability to correctly encode a signal representing a particular odor, which would send an erroneous signal to the odor processing center, the olfactory bulb. This, in turn, leads to the signal activating a different trigger, i.e. a different smell, than the stimulating odor, and thus the patient cannot sync the input and output odors. Damage to ORNs describes a peripheral defect in the pathway, but there are also instances where damage to the processing center in the brain can lead to distorted odors as well.

Different types of head traumas could obviously lead to dysfunctions that relate to what the afflicted brain area controls. In humans, the olfactory bulb is located on the inferior side of the brain. Physical damage to this area would alter how the area processes information in a variety of ways, but there are also other types of diseases that can alter how this area works. If the part of the brain that interprets these input signals is damaged, then a distorted output is possible. This would also lead to parosmia. Temporal lobe epilepsy has also led to cases of parosmia, but these were only temporary; the onset of parosmia was a seizure and it typically lasted a week or two after.

Parosmia is also a known symptom for Parkinson's disease, though not ubiquitous for patients with it, and although the specific pathway is undetermined, the lack of dopamine has resulted in documented cases of parosmia and phantosmia.

One study from as early as 1895 reported that approximately 10% of the population experiences hallucinations. A 1996-1999 survey of over 13,000 people reported a much higher figure, with almost 39% of people reporting hallucinatory experiences, 27% of which daytime hallucinations, mostly outside the context of illness or drug use. From this survey, olfactory (smell) and gustatory (taste) hallucinations seem the most common in the general population.

Anomalous experiences, such as so-called benign hallucinations, may occur in a person in a state of good mental and physical health, even in the apparent absence of a transient trigger factor such as fatigue, intoxication or sensory deprivation.

The evidence for this statement has been accumulating for more than a century. Studies of benign hallucinatory experiences go back to 1886 and the early work of the Society for Psychical Research, which suggested approximately 10% of the population had experienced at least one hallucinatory episode in the course of their life. More recent studies have validated these findings; the precise incidence found varies with the nature of the episode and the criteria of ‘hallucination’ adopted, but the basic finding is now well-supported.