Paxilline is an indole-diterpene produced by Penicillium paxilli. Six genes (paxB, C, G, M, P, and Q) in paxilline biosynthetic gene cluster were previously shown to be responsible for paxilline biosynthesis. In this study, we have characterized paxD, which is located next to paxQ and has weak similarities to fungal dimethylallyl tryptophan synthase genes. PaxD was overexpressed in Escherichia coli and the purified enzyme was used for in vitro analysis. When paxilline and dimethylallyl diphosphate were used as substrates, one major and one minor product, which were identified as di-prenyl paxilline and mono-prenyl paxilline by liquid chromatography-mass spectrometry analysis, were formed. The structure of the major product was determined to be 21,22-diprenylated paxilline, showing that PaxD catalyzed the successive di-prenylation. Traces of both products were detected in culture broth of P. paxilli by liquid chromatography-mass spectrometry analysis. The enzyme is likely to be a dimer and required no divalent cations. The optimum pH and temperature were 8.0 and 37 °C, respectively. The Km values were calculated as 106.4 ± 5.4 μM for paxilline and 0.57 ± 0.02 μM for DMAPP with a kcat of 0.97 ± 0.01/s.