In cotton, gossypol and related sesquiterpene aldehydes are present in the glands of aerial tissues and in epidermal cells of roots. A cytochrome P450 was found to be expressed in aerial tissues of glanded cotton cultivars, but not or at an extremely low level in the aerial tissues of a glandless cultivar. Its cDNA was then isolated from Gossypium arboreum L. After expression in Saccharomyces cerevisiae, the P450 was found to catalyse the hydroxylation of (+)-delta-cadinene, forming 8-hydroxy-(+)-delta-cadinene. This P450 mono-oxygenase has been classified as CYP706B1, and is the first member of the CYP706 family for which a function has been determined. Sesquiterpene aldehydes and CYP706B1 transcripts were detected in roots of both the glanded and glandless cultivars and in aerial tissues of the glanded cultivar. In suspension cultured cells of G. arboreum, elicitors prepared from the phytopathogenic fungus Verticillium dahliae caused a dramatic induction of CYP706B1 expression. The expression pattern of CYP706B1 and the position at which it hydroxylates (+)-delta-cadinene suggest that it catalyses an early step in gossypol biosynthesis. Southern blotting revealed a single copy of CYP706B1 in the genome of G. arboreum. CYP706B1 holds good potential for manipulation of gossypol levels in cottonseed via genetic engineering.