Terpenes make up the largest class of natural products, with extensive chemical and structural diversity. Diterpenes, mostly isolated from plants and rarely prokaryotes, exhibit a variety of important biological activities and valuable applications, including providing antitumor and antibiotic pharmaceuticals. These natural products are constructed by terpene synthases, a class of enzymes that catalyze one of the most complex chemical reactions in biology: converting simple acyclic oligo-isoprenyl diphosphate substrates to complex polycyclic products via carbocation intermediates. Here we obtained the second ever crystal structure of a class II diterpene synthase from bacteria, tuberculosinol pyrophosphate synthase (i.e., Halimadienyl diphosphate synthase, MtHPS, or Rv3377c) from Mycobacterium tuberculosis (Mtb). This enzyme transforms (E,E,E)-geranylgeranyl diphosphate into tuberculosinol pyrophosphate (Halimadienyl diphosphate). Rv3377c is part of the Mtb diterpene pathway along with Rv3378c, which converts tuberculosinol pyrophosphate to 1-tuberculosinyl adenosine (1-TbAd). This pathway was shown to exist only in virulent Mycobacterium species, but not in closely related avirulent species, and was proposed to be involved in phagolysosome maturation arrest. To gain further insight into the reaction pathway and the mechanistically relevant enzyme substrate binding orientation, electronic structure calculation and docking studies of reaction intermediates were carried out. Results reveal a plausible binding mode of the substrate that can provide the information to guide future drug design and anti-infective therapies of this biosynthetic pathway.