Steroidal saponins in Paris polyphylla featuring complicated sugar chains exhibit notable biological activities, but the sugar chain biosynthesis is still not fully understood. Here, we identified a 4'-O-rhamnosyltransferase (UGT73DY2) from P. polyphylla, which catalyzes the 4'-O-rhamnosylation of polyphyllins V and VI, producing dioscin and pennogenin 3-O-β-chacotrioside, respectively. UGT73DY2 exhibits strict substrate specificity towards steroidal diglycosides and UDP-Rha, and a new steroidal triglycoside was synthesized through enzyme catalysis. A mutation library was generated based on semi-rational design, identifying three mutants, I358T, A342V, and A132T, which displayed approximately two-fold enhanced enzyme activity. Molecular dynamics simulations revealed that shortened distances between the 4'-OH group of sugar acceptor and either the crucial residue H20 or the donor UDP-Rha contributed to the enhanced enzyme activity. Moreover, subcellular localization analysis of UGT73DY2 and other biosynthetic enzymes indicated that dioscin biosynthesis predominantly occurred in the endoplasmic reticulum of plant cells. By co-expressing 14 biosynthetic genes in Nicotiana benthamiana, optimizing HMGR subcellular localization and CYP450 gene sets, and engineering UGT73DY2, we successfully established a dioscin biosynthesis system with a yield of 3.12 ± 0.11 μg/g dry weight. This study not only uncovers the 4'-O-rhamnosylation process in steroidal saponin biosynthesis, but also presents an alternative approach for the production of steroidal saponins in P. polyphylla through synthetic biology and metabolic engineering.