Terpenoids are important for plant survival and also possess biological properties that are beneficial to humans. Here, we describe the state of the art in terpenoid metabolic engineering, showing that significant progress has been made over the past few years. Subcellular targeting of enzymes has demonstrated that terpenoid precursors in subcellular compartments are not as strictly separated as previously thought and that multistep pathway engineering is feasible, even across cell compartments. These engineered plants show that insect behavior is influenced by terpenoids. In the future, we expect rapid progress in the engineering of terpenoid production in plants. In addition to commercial applications, such transgenic plants should increase our understanding of the biological relevance of these volatile secondary metabolites.