Leaves of tobacco (Nicotiana tabacum) are covered with glandular trichomes that produce sucrose esters and diterpenoids in varying quantities, depending on cultivar type. The bicyclic diterpene Z-abienol is the major labdanoid present in some oriental tobacco cultivars, where it constitutes a precursor of important flavours and aromas. We describe here the identification and characterization of two genes governing the biosynthesis of Z-abienol in N. tabacum. As for other angiosperm labdanoid diterpenes, the biosynthesis of Z-abienol proceeds in two steps. NtCPS2 encodes a class-II terpene synthase that synthesizes 8-hydroxy-copalyl diphosphate, and NtABS encodes a kaurene synthase-like (KSL) protein that uses 8-hydroxy-copalyl diphosphate to produce Z-abienol. Phylogenetic analysis indicates that NtABS belongs to a distinct clade of KSL proteins that comprises the recently identified tomato (Solanum habrochaites) santalene and bergamotene synthase. RT-PCR results show that both genes are preferentially expressed in trichomes. Moreover, microscopy of NtCPS2 promoter-GUS fusion transgenics demonstrated a high specificity of expression to trichome glandular cells. Ectopic expression of both genes, but not of either one alone, driven by a trichome-specific promoter in transgenic Nicotiana sylvestris conferred Z-abienol formation to this species, which does not normally produce it. Furthermore, sequence analysis of over 100 tobacco cultivars revealed polymorphisms in NtCPS2 that lead to a prematurely truncated protein in cultivars lacking Z-abienol, thus establishing NtCPS2 as a major gene controlling Z-abienol biosynthesis in tobacco. These results offer new perspectives for tobacco breeding and the metabolic engineering of labdanoid diterpenes, as well as for structure-function relationship studies of terpene synthases.