Fungi (Ascomycota and Basidiomycota) are prolific producers of structurally diverse terpenoid compounds. Classes of terpenoids identified in fungi include the sesqui-, di- and triterpenoids. Biosynthetic pathways and enzymes to terpenoids from each of these classes have been described. These typically involve the scaffold generating terpene synthases and cyclases, and scaffold tailoring enzymes such as e.g. cytochrome P450 monoxygenases, NAD(P)+ and flavin dependent oxidoreductases, and various group transferases that generate the final bioactive structures. The biosynthesis of several sesquiterpenoid mycotoxins and bioactive diterpenoids has been well-studied in Ascomycota (e.g. filamentous fungi). Little is known about the terpenoid biosynthetic pathways in Basidiomycota (e.g. mushroom forming fungi), although they produce a huge diversity of terpenoid natural products. Specifically, many trans-humulyl cation derived sesquiterpenoid natural products with potent bioactivities have been isolated. Biosynthetic gene clusters responsible for the production of trans-humulyl cation derived protoilludanes, and other sesquiterpenoids, can be rapidly identified by genome sequencing and bioinformatic methods. Genome mining combined with heterologous biosynthetic pathway refactoring has the potential to facilitate discovery and production of pharmaceutically relevant fungal terpenoids.