Santalum album L. (Indian sandalwood) is an economically important plant species because of its ability to produce highly valued perfume oils. Little is known about the mechanisms by which S. album adapts to low temperatures. In this study, we obtained 100,445,724 raw reads by paired-end sequencing from S. album leaves. Physiological and transcriptomic changes in sandalwood seedlings exposed to 4 °C for 0-48 h were characterized. Cold stress induced the accumulation of malondialdehyde, proline and soluble carbohydrates, and increased the levels of antioxidants. A total of 4,424 differentially expressed genes were responsive to cold, including 3,075 cold-induced and 1,349 cold-repressed genes. When cold stress was prolonged, there was an increase in the expression of cold-responsive genes coding for transporters, responses to stimuli and stress, regulation of defense response, as well as genes related to signal transduction of all phytohormones. Candidate genes in the terpenoid biosynthetic pathway were identified, eight of which were significantly involved in the cold stress response. Gene expression analyses using qRT-PCR showed a peak in the accumulation of SaCBF2 to 4, 50-fold more than control leaves and roots following 12 h and 24 h of cold stress, respectively. The CBF-dependent pathway may play a crucial role in increasing cold tolerance.