Two diterpene synthases from the bacterium Chitinophaga pinensis were characterised. The first enzyme mainly produced the rearranged diterpene palmatol, a compound known from octocorals, while the second enzyme made the new coral‐type eunicellane chitinol. The mechanisms of both enzymes were deeply studied through isotopic labelling experiments, DFT calculations, and with a substrate analog containing a saturated double bond, resulting in the formation of derailment products that gave additional insights into the nature of the cyclisation cascade intermediates. The formation of coral‐type diterpenes poses interesting questions on the functions of these compounds in organisms as different as bacteria and corals.