Most sensory systems are organized into parallel neuronal pathways that process distinct aspects of incoming stimuli. In the insect olfactory system, second order projection neurons target both the mushroom body, required for learning, and the lateral horn (LH), proposed to mediate innate olfactory behavior. Mushroom body neurons form a sparse olfactory population code, which is not stereotyped across animals. In contrast, odor coding in the LH remains poorly understood. We combine genetic driver lines, anatomical and functional criteria to show that the LH has ~1400 neurons and >165 cell types. Genetically labeled LHNs have stereotyped odor responses across animals and on average respond to three times more odors than single projection neurons. LHNs are better odor categorizers than projection neurons, likely due to stereotyped pooling of related inputs. Our results reveal some of the principles by which a higher processing area can extract innate behavioral significance from sensory stimuli.