The Horseman's Blade is a sword that is dropped by the Pumpking, a boss monster who appears during the Pumpkin Moon event. When an enemy is hit, (doesn't work on PvP) a homing pumpkin head will come into the screen from one of the four corners. It is (with the homing pumpkin heads) the highest melee DPS possible to be attained, as it will ravage bosses very quickly.
The pumpkin heads summoned by the weapon are not stopped by walls or other objects.
To create a swarm of homing pumpkins, one can easily kill statue spawned mobs (e.g. Bunnies from Bunny Statues).
The pumpkin heads seem to either take a long time to despawn, or don't despawn at all despite flying off screen. They can come back to seek out a target that spawns later on if it fails to attack anything the first time it's spawned.
Despite being called The Horseman's Blade, the Headless Horseman does not drop this weapon.
The Horseman's Blade and its homing pumpkins may be a reference to The Legend of Sleepy Hollow, in which the main character is chased by his enemy masquerading as the Headless Horseman, who hurls a pumpkin at him.