Sesquiterpenes are the major pharmacodynamic components of agarwood, a precious traditional Chinese medicine obtained from the resinous portions of Aquilaria sinensis trees that form in response to environmental stressors. To characterize the sesquiterpene synthases responsible for sesquiterpene production in A. sinensis, a bioinformatics analysis of the genome of A. sinensis identified six new terpene synthase genes, and 16 sesquiterpene synthase genes were identified as type TPS-a in a phylogenetic analysis. The expression patterns for eight of the sesquiterpene synthase genes after treatment with various hormones or hydrogen peroxide were analyzed by real-time quantitative PCR. The results suggest that 100 μM methyl jasmonate, ethephon, ( ±)-abscisic acid or hydrogen peroxide could be effective short-term effectors to increase the expression of sesquiterpene synthase genes, while 1 mM methyl salicylate may have long-term effects on increasing the expression of specific sesquiterpene synthase genes (e.g., As-SesTPS, AsVS, AsTPS12 and AsTPS29). The expression changes in these genes under various conditions reflected their specific roles during abiotic or biotic stresses. Heterologous expression of a novel A. sinensis sesquiterpene synthase gene, AsTPS2, in Escherichia coli produced a major humulene product, so AsTPS2 is renamed AsHS1. AsHS1 is different from ASS1, AsSesTPS, and AsVS, for mainly producing α-humulene. Based on the predicted space conformation of the AsHS1 model, the small ligand molecule may bind to the free amino acid by hydrogen bonding for the catalytic function of the enzyme, while the substrate farnesyl diphosphate (FPP) probably binds to the free amino acid on one side of the RxR motif. Arg450, Asp453, Asp454, Thr457, and Glu461 from the NSE/DTE motif and D307 and D311 from the DDxxD motif were found to form a polar interaction with two Mg2+ clusters by docking. The Mg2+-bound DDxxD and NSE/DTE motifs and the free RXR motif are jointly directed into the catalytic pocket of AsHS1. Comparison of the tertiary structural models of AsHS1 with ASS1 showed that they differed in structures in several positions, such as surrounding the secondary catalytic pocket, which may lead to differences in catalytic products. Based on the results, biosynthetic pathways for specific sesquiterpenes such as α-humulene in A. sinensis are proposed. This study provides novel insights into the functions of the sesquiterpene synthases of A. sinensis and enriches knowledge on agarwood formation.