Tanshinones are the bioactive nor-diterpenoid constituents of the Chinese medicinal herb Danshen (Salvia miltiorrhiza). These groups of chemicals have the characteristic furan D-ring, which differentiates them from the phenolic abietane-type diterpenoids frequently found in the Lamiaceae family. However, how the 14,16-epoxy is formed has not been elucidated. Here, we report an improved genome assembly of Danshen using a highly homozygous genotype. We identify a cytochrome P450 (CYP71D) tandem gene array through gene expansion analysis. We show that CYP71D373 and CYP71D375 catalyze hydroxylation at carbon-16 (C16) and 14,16-ether (hetero)cyclization to form the D-ring, whereas CYP71D411 catalyzes upstream hydroxylation at C20. In addition, we discover a large biosynthetic gene cluster associated with tanshinone production. Collinearity analysis indicates a more specific origin of tanshinones in Salvia genus. It illustrates the evolutionary origin of abietane-type diterpenoids and those with a furan D-ring in Lamiaceae.