The filamentous fungus Penicillium paxilli contains two distinct geranylgeranyl diphosphate (GGPP) synthases, GgsA and GgsB (PaxG). PaxG and its homologues in Neotyphodium lolii and Fusarium fujikuroi are associated with diterpene secondary metabolite gene clusters. The genomes of other filamentous fungi including Aspergillus fumigatus, Aspergillus nidulans, Aspergillus niger, Aspergillus oryzae and Fusarium graminearum also contain two or more copies of GGPP synthase genes, although the diterpene metabolite capability of these fungi is not known. The objective of this study was to understand the biological significance of the presence of two copies of GGPP synthases in P. paxilli by investigating their subcellular localization. Using a carotenoid complementation assay and gene deletion analysis, we show that P. paxilli GgsA and PaxG have GGPP synthase activities and that paxG is required for paxilline biosynthesis, respectively. In the DeltapaxG mutant background ggsA was unable to complement paxilline biosynthesis. A GgsA-EGFP fusion protein was localized to punctuate organelles and the EGFP-GRV fusion protein, containing the C-terminus tripeptide GRV of PaxG, was localized to peroxisomes. A truncated PaxG mutant lacking the C-terminus tripeptide GRV was unable to complement a DeltapaxG mutant demonstrating that the tripeptide is functionally important for paxilline biosynthesis.