Terpenes are a large class of secondary metabolites with diverse structures and functions that are commonly used as valuable raw materials in food, cosmetics, and medicine. With the development of metabolic engineering and emerging synthetic biology tools, these important terpene compounds can be sustainably produced using different microbial chassis. Currently, yeasts such as Saccharomyces cerevisiae and Yarrowia lipolytica have received extensive attention as potential hosts for the production of terpenes due to their clear genetic background and endogenous mevalonate pathway. In this review, we summarize the natural terpene biosynthesis pathways and various engineering strategies, including enzyme engineering, pathway engineering, and cellular engineering, to further improve the terpene productivity and strain stability in these two widely used yeasts. In addition, the future prospects of yeast-based terpene production are discussed in light of the current progress, challenges, and trends in this field. Finally, guidelines for future studies are also emphasized.