Diterpenoids are the major group of antimicrobial phytoalexins in rice1,2. Here, we report the discovery of a rice diterpenoid gene cluster on chromosome 7 (DGC7) encoding the entire biosynthetic pathway to 5,10-diketo-casbene, a member of the monocyclic casbene-derived diterpenoids. We revealed that DGC7 is regulated directly by JMJ705 through methyl jasmonate-mediated epigenetic control3. Functional characterization of pathway genes revealed OsCYP71Z21 to encode a casbene C10 oxidase, sought after for the biosynthesis of an array of medicinally important diterpenoids. We further show that DGC7 arose relatively recently in the Oryza genus, and that it was partly formed in Oryza rufipogon and positively selected for in japonica during domestication. Casbene-synthesizing enzymes that are functionally equivalent to OsTPS28 are present in several species of Euphorbiaceae but gene tree analysis shows that these and other casbene-modifying enzymes have evolved independently. As such, combining casbene-modifying enzymes from these different families of plants may prove effective in producing a diverse array of bioactive diterpenoid natural products.