Plants produce an array of specialized metabolites, including chemicals that are important as medicines, flavors, fragrances, pigments and insecticides. The vast majority of this metabolic diversity is untapped. Here we take a systematic approach toward dissecting genetic components of plant specialized metabolism. Focusing on the terpenes, the largest class of plant natural products, we investigate the basis of terpene diversity through analysis of multiple sequenced plant genomes. The primary drivers of terpene diversification are terpenoid synthase (TS) "signature" enzymes (which generate scaffold diversity), and cytochromes P450 (CYPs), which modify and further diversify these scaffolds, so paving the way for further downstream modifications. Our systematic search of sequenced plant genomes for all TS and CYP genes reveals that distinct TS/CYP gene pairs are found together far more commonly than would be expected by chance, and that certain TS/CYP pairings predominate, providing signals for key events that are likely to have shaped terpene diversity. We recover TS/CYP gene pairs for previously characterized terpene metabolic gene clusters and demonstrate new functional pairing of TSs and CYPs within previously uncharacterized clusters. Unexpectedly, we find evidence for different mechanisms of pathway assembly in eudicots and monocots; in the former, microsyntenic blocks of TS/CYP gene pairs duplicate and provide templates for the evolution of new pathways, whereas in the latter, new pathways arise by mixing and matching of individual TS and CYP genes through dynamic genome rearrangements. This is, to our knowledge, the first documented observation of the unique pattern of TS and CYP assembly in eudicots and monocots.