Sensory loss induces cross-modal plasticity, often resulting in altered performance in remaining sensory modalities. Whereas much is known about the macroscopic mechanisms underlying cross-modal plasticity, only scant information exists about its cellular and molecular underpinnings. We found that Caenorhabditis elegans nematodes deprived of a sense of body touch exhibit various changes in behavior, associated with other unimpaired senses. We focused on one such behavioral alteration, enhanced odor sensation, and sought to reveal the neuronal and molecular mechanisms that translate mechanosensory loss into improved olfactory acuity. To this end, we analyzed in mechanosensory mutants food-dependent locomotion patterns that are associated with olfactory responses and found changes that are consistent with enhanced olfaction. The altered locomotion could be reversed in adults by optogenetic stimulation of the touch receptor (mechanosensory) neurons. Furthermore, we revealed that the enhanced odor response is related to a strengthening of inhibitory AWC→AIY synaptic transmission in the olfactory circuit. Consistently, inserting in this circuit an engineered electrical synapse that diminishes AWC inhibition of AIY counteracted the locomotion changes in touch-deficient mutants. We found that this cross-modal signaling between the mechanosensory and olfactory circuits is mediated by neuropeptides, one of which we identified as FLP-20. Our results indicate that under normal function, ongoing touch receptor neuron activation evokes FLP-20 release, suppressing synaptic communication and thus dampening odor sensation. In contrast, in the absence of mechanosensory input, FLP-20 signaling is reduced, synaptic suppression is released, and this enables enhanced olfactory acuity; these changes are long lasting and do not represent ongoing modulation, as revealed by optogenetic experiments. Our work adds to a growing literature on the roles of neuropeptides in cross-modal signaling, by showing how activity-dependent neuropeptide signaling leads to specific cross-modal plastic changes in neural circuit connectivity, enhancing sensory performance.