In response to herbivory, Capsicum annuum leaves adapt their specialized metabolome that may protect the plant against herbivore feeding either directly or indirectly through volatile metabolites acting as cues for natural enemies of the herbivore. The volatile blend of spider-mite infested leaves differs from non-challenged leaves predominantly by a higher contribution of mono- and sesquiterpenes. In addition to these terpenoids released into the headspace, the terpenoid composition of the leaves alters upon herbivory. All this suggests an important role for terpenoids and their biosynthetic machinery in the defence against herbivory. Here, we show that the C. annuum genome contains a terpene synthase (TPS) gene family of 103 putative members of which structural analysis revealed that 27 encode functional enzymes. Transcriptome analysis showed that several TPS loci were differentially expressed upon herbivory in leaves of two C. annuum genotypes, that differ in susceptibility towards spider mites. The relative expression of upstream biosynthetic genes from the mevalonate and the methylerythritol phosphate pathway also altered upon herbivory, revealing a shift in the metabolic flux through the terpene biosynthetic module. The expression of multiple genes potentially acting downstream of the TPSs, including cytochrome P450 monooxygenases, UDP-glucosyl transferases, and transcription factors strongly correlated with the herbivory-induced TPS genes. A selection of herbivory-induced TPS genes was functionally characterized through heterologous expression and the products that these enzymes catalysed matched with the volatile and non-volatile terpenoids induced in response to herbivory.