Mustard oil can mean either the pressed oil used for cooking, or a pungent essential oil also known as volatile oil of mustard. The essential oil results from grinding mustard seed, mixing the grounds with water, and isolating the resulting volatile oil by distillation. It can also be produced by dry distillation of the seed. Pressed mustard oil is used as cooking oil in some cultures, but sale is restricted in some countries due to high levels of erucic acid. Varieties of mustard seed also exist that are low in erucic acid.

The pungency of the condiment mustard results when ground mustard seeds are mixed with water, vinegar, or other liquid (or even when chewed). Under these conditions, a chemical reaction between the enzyme myrosinase and a glucosinolate known as sinigrin from the seeds of black mustard (Brassica nigra) or brown Indian mustard (Brassica juncea) produces allyl isothiocyanate. By distillation one can produce a very sharp-tasting essential oil, sometimes called volatile oil of mustard, containing more than 92% allyl isothiocyanate. The pungency of allyl isothiocyanate is due to the activation of the TRPA1 ion channel in sensory neurons. White mustard (Brassica hirta) does not yield allyl isothiocyanate, but the milder 4-Hydroxybenzyl isothiocyanate degraded from sinalbin rather than sinigrin.[12]

Allyl isothiocyanate serves the plant as a defense against herbivores. Since it is harmful to the plant itself, it is stored in the harmless form of a glucosinolate, separate from the enzyme myrosinase. Once the herbivore chews the plant, the noxious allyl isothiocyanate is produced. Allyl isothiocyanate is also responsible for the pungent taste of horseradish and wasabi. It can be produced synthetically, sometimes known as synthetic mustard oil.