Valerian is an herbal preparation from the roots of Valeriana officinalis used as an anxiolytic and sedative and in the treatment of insomnia. The biological activities of valerian are attributed to valerenic acid and its putative biosynthetic precursor valerenadiene, sesquiterpenes, found in V. officinalis roots. These sesquiterpenes retain an isobutenyl side chain whose origin has been long recognized as enigmatic because a chemical rationalization for their biosynthesis has not been obvious. Using recently developed metabolomic and transcriptomic resources, we identified seven V. officinalis terpene synthase genes (VoTPSs), two that were functionally characterized as monoterpene synthases and three that preferred farnesyl diphosphate, the substrate for sesquiterpene synthases. The reaction products for two of the sesquiterpene synthases exhibiting root-specific expression were characterized by a combination of GC-MS and NMR in comparison to the terpenes accumulating in planta. VoTPS7 encodes for a synthase that biosynthesizes predominately germacrene C, whereas VoTPS1 catalyzes the conversion of farnesyl diphosphate to valerena-1,10-diene. Using a yeast expression system, specific labeled [13C]acetate, and NMR, we investigated the catalytic mechanism for VoTPS1 and provide evidence for the involvement of a caryophyllenyl carbocation, a cyclobutyl intermediate, in the biosynthesis of valerena-1,10-diene. We suggest a similar mechanism for the biosynthesis of several other biologically related isobutenyl-containing sesquiterpenes.