Abscisic acid (ABA) is a well-known phytohormone that regulates abiotic stresses. ABA produced by fungi is also proposed to be a virulence factor of fungal pathogens. Although its biosynthetic pathway in fungi was proposed by a series of feeding experiments, the enzyme catalyzing the reaction from farnesyl diphosphate to alpha-ionylideneethane remains to be identified. In this work, we identified the novel type of sesquiterpene synthase BcABA3 and its unprecedented three-step reaction mechanism involving two neutral intermediates, beta-farnesene and allofarnesene. Database searches showed that BcABA3 has no homology with typical sesquiterpene synthases and that the homologous enzyme genes are found in more than 100 bacteria, suggesting that these enzymes form a new family of sesquiterpene synthases.