The 31-year-old defender was suspended for last weekend's 3-3 draw with fellow strugglers Cardiff, which saw the Welsh side snatch a point deep into injury time after Thievy Bifouma looked to have given the Baggies a vital three points.
Olsson also missed the 2-0 defeat to Hull the previous weekend and Mel feels the Swede could prove the difference as his side look to put space between themselves and the bottom three when they travel to Norwich on Saturday.
"For us, he's extremely important. He is a leader in the group and his contribution will be big this week," said Mel.
"The biggest problem is that because we didn't have Olsson when we were winning against Cardiff we couldn't play with three centre-backs.
"We couldn't make that change. Now I will decide whether we play with three centre-backs against Norwich."
Mel has endured a difficult tenure since taking over as West Brom boss three months ago.
Having already dealt with the fall-out from Nicolas Anelka's 'quenelle' gesture and subsequent sacking, this week he was forced to deal with a dressing room bust-up in the aftermath of the draw with Cardiff.
A number of players were reported to be unhappy with Saido Berahino's unwillingness to take responsibility for a mistake that led to Mats Moller Daehli's equaliser, leading to a confrontation with James Morrison.
Mel was keen to stress that all parties had put the incident behind them but Berahino's actions have belied this statement with the 20-year-old 'favouriting' a tweet by former Baggies striker Peter Odemwingie which urged his ex-team-mate to leave the club.
Mel admitted this week has been different but only because of the disappointment of last week's result.
"It's normal that this happens. The week is not the same as when we've had a very good week," he added.
"What we have to take from the Cardiff game is that we were in a winning position on two occasions and we didn't win the game. This week we've tried to look at this error and tried to put it right."