Grosmannia clavigera is a bark beetle-vectored pine pathogen in the mountain pine beetle epidemic in western North America. Grosmannia clavigera colonizes pines despite the trees' massive oleoresin terpenoid defences. We are using a functional genomics approach to identify G. clavigera's mechanisms of adaptation to pine defences. We annotated the ABC transporters in the G. clavigera genome and generated RNA-seq transcriptomes from G. clavigera grown with a range of terpenes. We functionally characterized GcABC-G1, a pleiotropic drug resistance (PDR) transporter that was highly induced by terpenes, using qRT-PCR, gene knock-out and heterologous expression in yeast. Deleting GcABC-G1 increased G. clavigera's sensitivity to monoterpenes and delayed development of symptoms in inoculated young lodgepole pine trees. Heterologous expression of GcABC-G1 in yeast increased tolerance to monoterpenes. G. clavigera but not the deletion mutant, can use (+)-limonene as a carbon source. Phylogenetic analysis placed GcABC-G1 outside the ascomycete PDR transporter clades. G. clavigera appears to have evolved two mechanisms to survive and grow when exposed to monoterpenes: GcABC-G1 controls monoterpene levels within the fungal cells and G. clavigera uses monoterpenes as a carbon source. This work has implications for understanding adaptation to host defences in an important forest insect-fungal system, and potentially for metabolic engineering of terpenoid production in yeast.