Terpenoids are an extensive and diverse group of plant secondary metabolites. To date, they have been applied in many fields including industry, medicine and health. The wide variety of terpenoid compounds cannot arise solely from simple cyclisations of a precursor molecule or from a single-step reaction; their structural diversity depends on the modification of many specific chemical groups, rearrangements of their skeletal structures and on the post-modification reactions. Most of the post-modification enzymes that catalyse these reactions are cytochrome P450 monooxygenases. Therefore, the discovery and identification of plant P450 genes plays a vital role in the exploration of terpenoid biosynthesis pathways. This review summarises recent research progress relating to the function of plant cytochrome P450 enzymes, describes P450 genes that have been cloned from full-length cDNA and identifies the function of P450 enzymes in the terpenoid biosynthesis pathways of several medicinal plants.