The aroma, flavor and pharmaceutical value of cultivated oregano (Origanum vulgare L.) is a consequence of its essential oil which consists mostly of monoterpenes and sesquiterpenes. To investigate the biosynthetic pathway to oregano terpenes and its regulation, we identified and characterized seven terpene synthases, key enzymes of terpene biosynthesis, from two cultivars of O. vulgare. Heterologous expression of these enzymes showed that each forms multiple mono- or sesquiterpene products and together they are responsible for the direct production of almost all terpenes found in O. vulgare essential oil. The correlation of essential oil composition with relative and absolute terpene synthase transcript concentrations in different lines of O. vulgare demonstrated that monoterpene synthase activity is predominantly regulated on the level of transcription and that the phenolic monoterpene alcohol thymol is derived from gamma-terpinene, a product of a single monoterpene synthase. The combination of heterologously-expressed terpene synthases for in vitro assays resulted in blends of mono- and sesquiterpene products that strongly resemble those found in vivo, indicating that terpene synthase expression levels directly control the composition of the essential oil. These results will facilitate metabolic engineering and directed breeding of O. vulgare cultivars with higher quantity of essential oil and improved oil composition.