Updated for v10:

1. Install https://apps.odoo.com/apps/modules/10.0/base_location/ 

EITHER:

A. Load in a City, State, Zip data file.  I use the US Census files because they are free and updated every year.

http://www.census.gov/econ/cbp/download 

You will have to manipulate this file in Excel to pull out the information.  A format like this will go straight into Odoo:

 ID,Zip,City,State,Country
00501,00501,Holtsville,NY,United States
01001,01001,Agawam,MA,United States
01002,01002,Amherst,MA,United States
01003,01003,Amherst,MA,United States
01004,01004,Amherst,MA,United States
01005,01005,Barre,MA,United States
01007,01007,Belchertown,MA,United States
01008,01008,Blandford,MA,United States
01009,01009,Bondsville,MA,United States
01010,01010,Brimfield,MA,United States
01011,01011,Chester,MA,United States
01012,01012,Chesterfield,MA,United States
01013,01013,Chicopee,MA,United States
01014,01014,Chicopee,MA,United States

OR:

B. Install https://apps.odoo.com/apps/modules/10.0/base_location_geonames_import/ to do the download and import for you.

This allow users to enter a Zip Code and have the City, State automatically completed. This also catches invalid Zip Codes – ensuring a higher quality of data in your system.

Address completion is available on the screens where you enter a partner address:  

1. Navigate to the Sales --> Sales --> Customers Menu and click CREATE.

You will see a field above the City, State Zip area where you will enter the Zip Code and see the related City and State that will be auto completed:

2. As you enter the Zip Code, Odoo will show you a list of matches you can choose from: 

3.  Once you select the Zip Code, the City, State and Country are automatically filled in:

You can manually add a missing Zip Code record by navigating to Sales --> Configuration --> Address Book -->
Localization --> Cities/Location