Terpenoid metabolism plays vital roles in stress defense and the environmental adaptation of monocot crops. Here, we describe the identification of the terpene synthase (TPS) gene family of the panicoid food and bioenergy model crop foxtail millet (Setaria italica). The diploid S. italica genome contains 32 TPS genes, 17 of which were biochemically characterized in this study. Unlike other thus far investigated grasses, S. italica contains TPSs producing all three ent-, (+)- and syn-copalyl pyrophosphate stereoisomers that naturally occur as central building blocks in the biosynthesis of distinct monocot diterpenoids. Conversion of these intermediates by the promiscuous TPS SiTPS8 yielded different diterpenoid scaffolds. Additionally, a cytochrome P450 monooxygenase (CYP99A17), which genomically clustered with SiTPS8, catalyzes the C19 hydroxylation of SiTPS8 products to generate the corresponding diterpene alcohols. The presence of syntenic orthologs to about 19% of the S. italica TPSs in related grasses supports a common ancestry of selected pathway branches. Among the identified enzyme products, abietadien-19-ol, syn-pimara-7,15-dien-19-ol and germacrene-d-4-ol were detectable in planta, and gene expression analysis of the biosynthetic TPSs showed distinct and, albeit moderately, inducible expression patterns in response to biotic and abiotic stress. In vitro growth-inhibiting activity of abietadien-19-ol and syn-pimara-7,15-dien-19-ol against Fusarium verticillioides and Fusarium subglutinans may indicate pathogen defensive functions, whereas the low antifungal efficacy of tested sesquiterpenoids supports other bioactivities. Together, these findings expand the known chemical space of monocot terpenoid metabolism to enable further investigations of terpenoid-mediated stress resilience in these agriculturally important species.