Daurichromenic acid (DCA) synthase catalyzes the oxidative cyclization of grifolic acid to produce DCA, an anti-HIV meroterpenoid isolated from Rhododendron dauricum. We identified a novel cDNA encoding DCA synthase by transcriptome-based screening from young leaves of R. dauricum. The gene coded for a 533-amino acid polypeptide with moderate homologies to flavin adenine dinucleotide oxidases from other plants. The primary structure contained an amino-terminal signal peptide and conserved amino acid residues to form bicovalent linkage to the flavin adenine dinucleotide isoalloxazine ring at histidine-112 and cysteine-175. In addition, the recombinant DCA synthase, purified from the culture supernatant of transgenic Pichia pastoris, exhibited structural and functional properties as a flavoprotein. The reaction mechanism of DCA synthase characterized herein partly shares a similarity with those of cannabinoid synthases from Cannabis sativa, whereas DCA synthase catalyzes a novel cyclization reaction of the farnesyl moiety of a meroterpenoid natural product of plant origin. Moreover, in this study, we present evidence that DCA is biosynthesized and accumulated specifically in the glandular scales, on the surface of R. dauricum plants, based on various analytical studies at the chemical, biochemical, and molecular levels. The extracellular localization of DCA also was confirmed by a confocal microscopic analysis of its autofluorescence. These data highlight the unique feature of DCA: the final step of biosynthesis is completed in apoplastic space, and it is highly accumulated outside the scale cells.