Touch can be highly emotional, and depending on the environment, it can be perceived as pleasant and comforting or disgusting and dangerous. Here, we studied the impact of context on the processing of tactile stimuli using a functional magnetic resonance imaging (fMRI) paradigm. This was achieved by embedding tactile stimulation in a variable olfactory environment. Twenty people were scanned with BOLD fMRI while receiving the following stimulus blocks: Slow stroking Touch, Civette odor (feces like), Rose odor, Touch+Civette, and Touch+Rose. Ratings of pleasantness and intensity of tactile stimuli and ratings of disgust and intensity of olfactory stimuli were collected. The impact of the olfactory context on the processing of touch was studied using covariance analyses. Coupling between olfactory processing and somatosensory processing areas was assessed with psychophysiological interaction analysis (PPI). A subjectively disgusting olfactory environment significantly reduced the perceived pleasantness of touch. The touch fMRI activation in the secondary somatosensory cortex, operculum 1 (OP1), was positively correlated with the disgust towards the odors. Decreased pleasantness of touch was related to decreased posterior insula activity. PPI analysis revealed a significant interaction between the OP1, posterior insula, and regions processing the disgust of odors (orbitofrontal cortex and amygdala). We conclude that the disgust evaluation of the olfactory environment moderates neural reactivity in somatosensory regions by upregulation of the OP1 and downregulation of the posterior insula. This adaptive regulation of affective touch processing may facilitate adaptive reaction to a potentially harmful stimulus.