Peripheral neurons of most sensory systems increase their response with increasing stimulus intensity. Behavioural responses, however, can be specific to some intermediate intensity level whose particular value might be innate or associatively learned. Learning such a preference requires an adjustable transformation from a monotonic stimulus representation at the sensory periphery to a non-monotonic representation for the motor command. How do neural systems accomplish this task? We tackle this general question focusing on odour intensity learning in the fruit fly; whose first- and second-order olfactory neurons show monotonic stimulus response curves. Nevertheless, flies form associative memories specific to particular trained odour intensities. Thus, downstream of the first two olfactory processing layers, odour intensity must be re-coded to enable intensity-specific associative learning. We present a minimal, feed-forward, three-layer circuit, which implements the required transformation by combining excitation, inhibition, and, as a decisive third element, homeostatic plasticity. Key features of this circuit motif are consistent with the known architecture and physiology of the fly olfactory system, whereas alternative mechanisms are either not composed of simple, scalable building blocks or not compatible with physiological observations. The simplicity of the circuit and the robustness of its function under parameter changes make this computational motif an attractive candidate for tuneable non-monotonic intensity coding.