Prenylation plays a major role in the diversification of aromatic natural products, such as phenylpropanoids, flavonoids, and coumarins. This biosynthetic reaction represents the crucial coupling process of the shikimate or polyketide pathway providing an aromatic moiety and the isoprenoid pathway derived from the mevalonate or methyl erythritol phosphate (MEP) pathway, which provides the prenyl (isoprenoid) chain. In particular, prenylation contributes strongly to the diversification of flavonoids, due to differences in the prenylation position on the aromatic rings, various lengths of prenyl chain, and further modifications of the prenyl moiety, e.g., cyclization and hydroxylation, resulting in the occurrence of ca. 1000 prenylated flavonoids in plants. Many prenylated flavonoids have been identified as active components in medicinal plants with biological activities, such as anti-cancer, anti-androgen, anti-leishmania, and anti-nitric oxide production. Due to their beneficial effects on human health, prenylated flavonoids are of particular interest as lead compounds for producing drugs and functional foods. However, the gene coding for prenyltransferases that catalyze the key step of flavonoid prenylation have remained unidentified for more than three decades, because of the membrane-bound nature of these enzymes. Recently, we have succeeded in identifying the first prenyltransferase gene SfN8DT-1 from Sophora flavescens, which is responsible for the prenylation of the flavonoid naringenin at the 8-position, and is specific for flavanones and dimethylallyl diphosphate (DMAPP) as substrates. Phylogenetic analysis showed that SfN8DT-1 has the same evolutionary origin as prenyltransferases for vitamin E and plastoquinone. A prenyltransferase GmG4DT from soybean, which is involved in the formation of glyceollin, was also identified recently. This enzyme was specific for pterocarpan as its aromatic substrate, and (-)-glycinol was the native substrate yielding the direct precursor of glyceollin I. These enzymes are localized to plastids and the prenyl chain is derived from the MEP pathway. Further relevant genes involved in the prenylation of other types of polyphenol are expected to be cloned by utilizing the sequence information provided by the above studies.