Perhaps your new leather sofa has a strong chemical scent; or an old sofa smells of wet dogs, perfume or years of tobacco. Regardless, your sofa is hardly ruined, but it requires a thorough cleaning. If it is an old sofa, and particularly if the smell is from smoke, you will need to clean every surface of the sofa, including the cloth underside and wooden legs. You may clean your sofa with readily-available items from the grocery store.
Work up a sudsy solution of baby shampoo in a bowl.
Rub down all leather surfaces with the shampoo solution. Do not soak the leather—rather, rub it gently to loosen the deposits or chemicals.
Rinse and change the cloths frequently, to remove the deposits rather than work them in. You should notice that your cloths become grubby as cleaning progresses.
Use several damp, clean cloths to remove the baby shampoo.
Allow the sofa to air dry for perhaps two days. If the leather appears or feels dull, apply a cream-based leather conditioner (available from any good furniture store).
Use a mild facial bar like Dove, as an alternative to baby shampoo. Work up a suds on the wet cloths, instead of dipping them in the baby shampoo, and repeat as above.
Remove any cushions, and turn your sofa on its back to expose the underside. If your couch is old, the cloth underside and wood legs likely retain odors as well.
Make a mild solution of a mild detergent like Woolite, with a splash of white ammonia. The ammonia smells dreadful, but will evaporate completely, and will tackle the strongest odors (even mildew).
Dampen a cloth with the Woolite/ammonia solution, and wipe down the cloth underside. Work from one corner to the far corner, touching every inch. Change your cloth often—it should become quite dirty.
Rinse the underside with wet, clean cloths, again, changing them often. Repeat until the ammonia smell is almost gone. (The rest will evaporate on its own. Repeat for other cloth surfaces, like under the cushions.
Allow the cloth surfaces to dry completely (at least overnight). Covering them before then risks causing mildew.
Use baby shampoo or Murphy's Oil Soap to wipe down the wooden legs or other surfaces.