The astounding structural and biological diversity of the large class of terpenoid natural products are imparted by both their complex hydrocarbon backbones and further elaboration by the addition of multiple hydroxyl groups, which provide both solubility and specific binding properties. While the role of terpene synthases in generating hydrocarbons with complex backbones is well known, these also are known to generate (singly) hydroxylated products by the addition of water prior to terminating deprotonation. Here a maize sesquiterpene synthase was unexpectedly found to generate dually hydroxylated products directly from (E,E)-farnesyl diphosphate, primarily eudesmane-2,11-diol, along with two closely related structural isomers. The unprecedented formation of these diols was proposed to proceed via initial addition of water to a germacradienyl+ intermediate, followed by protonation of the internal carbon-6,7-double-bond in the resulting hedycarol, with subsequent cyclization and further addition of water to an eudesmolyl+ intermediate. Evidence for the proposed mechanism was provided by labeling studies, as well as site-directed mutagenesis, based on structural modeling, which identified an active site phenylalanine required for the protonation and further elaboration of hedycaryol. This di-hydroxylated sesquiterpenoid synthase was specifically expressed in maize roots and induced by pathogen infection, with its major enzymatic product only detected in root exudates or infected roots, suggesting a role in defense. Regardless of the ultimate metabolic fate or physiological role of these diols, this report not only reveals an unanticipated extension of the catalytic prowess of terpene synthases, but also provides insight into the underlying enzymatic mechanism.