Panax ginseng is one of the most highly valued herbal medicines in the Orient, where it has gained an almost magical reputation for being able to maintain the quality of life. The root of ginseng contains noble tetracyclic triterpenenoid saponins, which are thought to be the major effective ingredients in P. ginseng. The first committed step in ginsenoside synthesis is the cyclization of 2,3-oxidosqualene to dammarenediol II by oxidosqualene cyclase, dammarenediol synthase (DDS). The gene encoding DDS has been characterized. Here, we investigated the expression of the DDS gene together with the genes involved in ginsenoside biosynthesis (SS, SE, PNX, PNY, PNY2 and PNZ). Expression of DDS mRNA was higher in flower buds compared with root, leaf and petiole of ginseng plants. Elicitor (methyl jasmonate) treatment up-regulated the expression of DDS mRNA. Ectopic expression of DDS in a yeast mutant (erg7) lacking lanosterol synthase resulted in the production of dammarenediol and hydroxydammarenone which were confirmed by liquid chromatography-atmospheric pressure chemical ionization mass spectrometry (LC/APCIMS). RNA interference (RNAi) of DDS in transgenic P. ginseng resulted in silencing of DDS expression which leads to a reduction of ginsenoside production to 84.5% in roots. These results indicate that expression of DDS played a vital role in the biosynthesis of ginsenosides in P. ginseng.