Pinus massoniana is a pioneer species for afforestation timber and oleoresin, while epidemics of pinewood nematode (PWN; Bursaphelenchus xylophilus) are causing a serious biotic disaster for P. massoniana in China. Importantly, resistant P. massoniana could leak copious oleoresin terpenoids to build particular defense fronts for survival when attacked by PWN. However, the defense mechanisms regulating this process remain unknown. Here, PmCYP720B11v2, a cytochrome P450 monooxygenase gene, was first identified and functionally characterized from resistant P. massoniana following PWN inoculation. The tissue-specific expression pattern and localization of PmCYP720B11v2 at the transcript and protein levels in resistant P. massoniana indicated that its upregulation in the stem supported its involvement in the metabolic processes of diterpene biosynthesis as a positive part of the defense against PWN attack. Furthermore, overexpression of PmCYP720B11v2 may enhance the growth and development of plants. In addition, PmCYP720B11v2 activated the metabolic flux of antioxidases and stress-responsive proteins under drought conditions and improved drought stress tolerance. Our results provide new insights into the favorable role of PmCYP720B11v2 in diterpene defense mechanisms in response to PWN attack in resistant P. massoniana and provide a novel metabolic engineering scenario to reform the stress tolerance potential of tobacco.