Introduction: Olfactory dysfunction has been included among the early symptoms of coronavirus disease (COVID-19). Evidence suggests that a relationship exists between the duration of olfaction disorders and the probability of developing severe COVID-19. Given the scope of the COVID-19 pandemic, this study aimed to determine the frequency of smell alteration and its association with the severity of COVID-19 in a referral hospital in Peru, which is one of the most affected countries in the Latin American region. Materials and Methods: This study was an observational, prospective cohort study that included patients with COVID-19 who were treated at the Hospital Nacional Edgardo Rebagliati Martins from August to November 2020. To assess the association, the chi-square test of independence or Fisher’s exact test was performed. The outcome variable was COVID-19 severity, and the exposure variable was olfactory dysfunction. The first data collection was in the emergency department and the follow-up was via telephone. Results: A total of 179 patients were included. The mean age was 61.6 ± 15.5 years, and 129 patients (72.1%) were male. Olfactory dysfunction was observed in 43 patients (24%). An inverse association was found between age and olfactory dysfunction (P =.002). No significant association was found between COVID-19 severity level and olfactory alteration (P =.056). However, a direct association was found between COVID-19 severity and age (P =.003), cough (P <.001), and respiratory distress (P =.003). Conclusion: This study did not find any association between the severity of COVID-19 and olfactory dysfunction. It showed a low incidence rate of smell alteration compared with studies from other regions. Moreover, smell alteration was associated with younger age.