Memory is initially labile and gradually consolidated over time through new protein synthesis into a long-lasting stable form. Studies of odor-shock associative learning in Drosophila have established the mushroom body (MB) as a key brain structure involved in olfactory long-term memory (LTM) formation. Exactly how early neural activity encoded in thousands of MB neurons is consolidated into protein-synthesis–dependent LTM remains unclear. Here, several independent lines of evidence indicate that changes in two MB vertical lobe V3 (MB-V3) extrinsic neurons are required and contribute to an extended neural network involved in olfactory LTM: (i) inhibiting protein synthesis in MB-V3 neurons impairs LTM; (ii) MB-V3 neurons show enhanced neural activity after spaced but not massed training; (iii) MB-V3 dendrites, synapsing with hundreds of MB α/β neurons, exhibit dramatic structural plasticity after removal of olfactory inputs; (iv) neurotransmission from MB-V3 neurons is necessary for LTM retrieval; and (v) RNAi-mediated down-regulation of oo18 RNA-binding protein (involved in local regulation of protein translation) in MB-V3 neurons impairs LTM. Our results suggest a model of long-term memory formation that includes a systems-level consolidation process, wherein an early, labile olfactory memory represented by neural activity in a sparse subset of MB neurons is converted into a stable LTM through protein synthesis in dendrites of MB-V3 neurons synapsed onto MB α lobes.