Terpenoids belong to the largest class of natural compounds and are produced in all living organisms. The isoprenoid skeleton is based on assembling of C5 building blocks, but the biosynthesis of a great variety of terpenoids ranging from monoterpenoids to polyterpenoids is not fully understood today. Terpenoids play a fundamental role in human nutrition, cosmetics, and medicine. In the past 10 years, many metabolic engineering efforts have been undertaken in plants but also in microorganisms to improve the production of various terpenoids like artemisinin and paclitaxel. Recently, inverse metabolic engineering and combinatorial biosynthesis as main strategies in synthetic biology have been applied to produce high-cost natural products like artemisinin and paclitaxel in heterologous microorganisms. This review describes the recent progresses made in metabolic engineering of the terpenoid pathway with particular focus on fundamental aspects of host selection, vector design, and system biotechnology.