SummaryA wide variety of sesquiterpenoids have been isolated from basidiomycetes, and their bioactive properties have attracted significant attention in an effort to understand biosynthetic machineries. As both sesquiterpene synthases and cytochrome P450 monooxygenases play key roles in the diversification of sesquiterpenoids, it is important to widely and mutually understand their biochemical properties. In this study, we performed genome‐wide annotation and functional characterization of sesquiterpene synthases from the brown‐rot basidiomycete Postia placenta. Using RT‐PCR, we isolated 16 sesquiterpene synthases genes as full‐length cDNAs. Heterologous expression revealed that the sesquiterpene synthases could produce a series of sesquiterpene scaffolds with distinct metabolic profiles. Based on metabolic studies, we identified 25 sesquiterpene scaffolds including Δ6‐protoilludene produced by the sesquiterpene synthases. In particular, a protoilludene synthase from the brown‐rot basidiomycete was characterized for the first time. Furthermore, we conducted a semi‐comprehensive functional screening of cytochrome P450 monooxygenases from P. placenta to elucidate biosynthetic machineries involved in metabolisms of Δ6‐protoilludene. Coexpression of protoilludene synthase and 184 isoforms of cytochrome P450 monooxygenases enabled the identification of CYP5344B1, CYP5348E1 and CYP5348J3, which catalysed the hydroxylation reaction of Δ6‐protoilludene to produce Δ6‐protoilludene‐8‐ol and Δ6‐protoilludene‐5‐ol. Furthermore, structural isomers of Δ7‐protoilludene‐6‐ol were obtained from incubation of Δ6‐protoilludene‐8‐ol in acidic culture medium.