Diterpenoids, including more than 18,000 compounds, represent an important class of metabolites that encompass both phytohormones and some industrially relevant compounds. These molecules with complex, diverse structures and physiological activities, have high value in the pharmaceutical industry. Most medicinal diterpenoids are extracted from plants. Major advances in understanding the biosynthetic pathways of these active compounds are providing unprecedented opportunities for the industrial production of diterpenoids by metabolic engineering and synthetic biology. Here, we summarize recent developments in the field of diterpenoid biosynthesis from medicinal herbs. An overview of the pathways and known biosynthetic enzymes is presented. In particular, we look at the main findings from the past decade and review recent progress in the biosynthesis of different groups of ringed compounds. We also discuss diterpenoid production using synthetic biology and metabolic engineering strategies, and draw on new technologies and discoveries to bring together many components into a useful framework for diterpenoid production.