Valerian (Valeriana officinalis) is a popular medicinal plant in North America and Europe. Its root extract is commonly used as a mild sedative and anxiolytic. Among dozens of chemical constituents (e.g. alkaloids, iridoids, flavonoids, and terpenoids) found in valerian root, valerena-4,7(11)-diene and valerenic acid (C15 sesquiterpenoid) have been suggested as the active ingredients responsible for the sedative effect. However, the biosynthesis of the valerena-4,7(11)-diene hydrocarbon skeleton in valerian remains unknown to date. To identify the responsible terpene synthase, next-generation sequencing (Roche 454 pyrosequencing) was used to generate ∼ 1 million transcript reads from valerian root. From the assembled transcripts, two sesquiterpene synthases were identified (VoTPS1 and VoTPS2), both of which showed predominant expression patterns in root. Transgenic yeast expressing VoTPS1 and VoTPS2 produced germacrene C/germacrene D and valerena-4,7(11)-diene, respectively, as major terpene products. Purified VoTPS1 and VoTPS2 recombinant enzymes confirmed these activities in vitro, with competent kinetic properties (Km of ∼ 10 μm and kcat of 0.01 s−1 for both enzymes). The structure of the valerena-4,7(11)-diene produced from the yeast expressing VoTPS2 was further substantiated by 13C-NMR and GC-MS in comparison with the synthetic standard. This study demonstrates an integrative approach involving next-generation sequencing and metabolically engineered microbes to expand our knowledge of terpenoid diversity in medicinal plants.