Taxol is a potent drug used in various cancer treatments. Its complex structure has prompted extensive research into its biosynthesis. However, certain critical steps, such as the formation of the oxetane ring, which is essential for its activity, have remained unclear. Previous proposals suggested that oxetane formation follows the acetylation of taxadien-5α-ol. Here, we proposed that the oxetane ring is formed by cytochrome P450-mediated oxidation events that occur prior to C5 acetylation. To test this hypothesis, we analyzed the genomic and transcriptomic information for Taxus species to identify cytochrome P450 candidates and employed two independent systems, yeast (Saccharomyces cerevisiae) and plant (Nicotiana benthamiana), for their characterization. We revealed that a single enzyme, CYP725A4, catalyzes two successive epoxidation events, leading to the formation of the oxetane ring. We further showed that both taxa-4(5)-11(12)-diene (endotaxadiene) and taxa-4(20)-11(12)-diene (exotaxadiene) are precursors to the key intermediate, taxologenic oxetane, indicating the potential existence of multiple routes in the Taxol pathway. Thus, we unveiled a long-elusive step in Taxol biosynthesis.