CHICO, the Drosophila homolog of vertebrate insulin receptor substrate (IRS), mediates insulin/insulin-like growth factor signaling (IIS), and reductions in chico severely disrupt cell growth and proliferation. We found extensive expression of chico in various Drosophila brain regions including the mushroom bodies (MBs), critical neural structures for olfactory learning. chico null mutants have significantly reduced brain sizes and perform poorly in an olfactory associative learning task, although their sensitivity to the odors and electric shocks used in this learning paradigm are normal. When initial memory is normalized by training for different amounts of time (short-duration training protocols), memory retention and retrieval in chico flies are indistinguishable from that of wild-type flies, demonstrating that chico mutants are defective specifically for memory formation. Inducing expression of a chico(+) transgene in neurons throughout development restores normal learning in a chico background, while inducing chico(+) specifically at the adult stage does not, suggesting that chico is required for development of a brain region required for forming olfactory associations. Significantly, expressing chico(+) in the MBs restores the number of MB neurons to wild-type amounts and also rescues chico learning defects. Our results suggest that chico-dependent growth of the MBs is essential for development of learning ability.