Sea sponges are the largest marine source of small-molecule natural products described to date. Sponge-derived molecules, such as the chemotherapeutic eribulin, the calcium-channel blocker manoalide, and antimalarial compound kalihinol A, are renowned for their impressive medicinal, chemical, and biological properties. Sponges contain microbiomes that control the production of many natural products isolated from these marine invertebrates. In fact, all genomic studies to date investigating the metabolic origins of sponge-derived small molecules concluded that microbes—not the sponge animal host—are the biosynthetic producers. However, early cell-sorting studies suggested the sponge animal host may play a role particularly in the production of terpenoid molecules. To investigate the genetic underpinnings of sponge terpenoid biosynthesis, we sequenced the metagenome and transcriptome of an isonitrile sesquiterpenoid-containing sponge of the order Bubarida. Using bioinformatic searches and biochemical validation, we identified a group of type I terpene synthases (TSs) from this sponge and multiple other species, the first of this enzyme class characterized from the sponge holobiome. The Bubarida TS-associated contigs consist of intron-containing genes homologous to sponge genes and feature GC percentage and coverage consistent with other eukaryotic sequences. We identified and characterized TS homologs from five different sponge species isolated from geographically distant locations, thereby suggesting a broad distribution amongst sponges. This work sheds light on the role of sponges in secondary metabolite production and speaks to the possibility that other sponge-specific molecules originate from the animal host.