Terpene synthases produce a wide number of hydrocarbon skeletons by controlling intramolecular rearrangements of allylic pyrophosphate subtrates via reactive carbocation intermediates. Here we review recent research focused on engineering terpene synthases and modifying their substrates to rationally manipulate terpene catalyisis. Molecular dynamic simulations and solid state X-ray crystallography are powerful techniques to identify substrate binding modes, key active site residues for substrate folding, and the location of active site water. Variants in specific 'hotspots' of terpene synthases including the G1/2, K/H and Hα-1 helices have been targeted to modify active site water management and yield new products. We discuss the potential of exploiting substrate analogues to synthesise novel compounds and briefly outline biphasic flow systems for biocatalysis of terpenes. We forsee greater applications for terpenes as the field converges on effective methods for engineering of terpene synthases by new computational and high throughput experimental methods and for high-yield production. It is crucial when engineering terpene synthases that both product distribution and enzyme activity are simultaneously optimised.