Paclitaxel is a well-known anticancer compound. Its biosynthesis involves the formation of a highly functionalized diterpenoid core skeleton (baccatin III) and the subsequent assembly of a phenylisoserinoyl side chain. Despite intensive investigation for half a century, the complete biosynthetic pathway of baccatin III remains unknown. Here, we identified a bifunctional cytochrome P450 enzyme (Taxane oxetanase, TOT) that catalyzes an oxidative rearrangement in paclitaxel oxetane formation, representing a previously unknown enzyme mechanism for oxetane ring formation. We created a screening strategy based on the taxusin biosynthesis pathway and uncovered the enzyme responsible for the taxane oxidation of the C9-position (T9αH). Finally, we artificially reconstituted a biosynthetic pathway for the production of baccatin III in tobacco.