The fragrant heartwood oil of West Australian sandalwood (Santalum spicatum) contains a mixture of sesquiterpene olefins and alcohols, including variable levels of the valuable sesquiterpene alcohols, α- and β-santalol, and often high levels of E,E-farnesol. Transcriptome analysis revealed sequences for a nearly complete set of genes of the sesquiterpenoid biosynthetic pathway in this commercially valuable sandalwood species. Transcriptome sequences were produced from heartwood xylem tissue of a farnesol-rich individual tree. From the assembly of 12,537 contigs, seven different terpene synthases (TPSs), several cytochromes P450, and allylic phosphatases were identified, as well as transcripts of the mevalonic acid and methylerythritol phosphate pathways. Five of the S. spicatum TPS sequences were previously unknown. The full-length cDNA of SspiTPS4 was cloned and the enzyme functionally characterized as a multi-product sesquisabinene B synthase, which complements previous characterization of santalene and bisabolol synthases in S. spicatum. While SspiTPS4 and previously cloned sandalwood TPSs do not explain the prevalence of E,E-farnesol in S. spicatum, the genes identified in this and previous work can form a basis for future studies on natural variation of sandalwood terpenoid oil profiles.