The diterpene pleuromutilin is a ribosome-targeting antibiotic isolated from basidiomycete fungi, such as Clitopilus pseudo-pinsitus. The functional characterization of all biosynthetic enzymes involved in pleuromutilin biosynthesis is reported and a biosynthetic pathway proposed. In vitro enzymatic reactions and mutational analysis revealed that a labdane-related diterpene synthase, Ple3, catalyzed two rounds of cyclization from geranylgeranyl diphosphate to premutilin possessing a characteristic 5-6-8-tricyclic carbon skeleton. Biotransformation experiments utilizing Aspergillus oryzae transformants possessing modification enzyme genes allowed the biosynthetic pathway from premutilin to pleuromutilin to be proposed. The present study sets the stage for the enzymatic synthesis of natural products isolated from basidiomycete fungi, which are a prolific source of structurally diverse and biologically active terpenoids.