Terpenoids are a diverse group of natural products and play important roles in all living organisms. Terpenoid biosynthesis has been extensively studied in plants and fungi. However, cloning and engineering terpenoid pathways in these eukaryotic organisms remain challenging. Terpenoids are also produced by numerous bacteria. The research progress in bacterial terpenoid synthesis for decades made significant contributions to our understanding of terpenoid biosynthesis. Here we will focus on bacterial sesquiterpenoids and briefly review their chemical structures, the mechanisms of farnesyl diphosphate cyclization catalyzed by sesquiterpene cyclases, post modifications of sesquiterpenes by enzymes especially oxidoreductases, metabolic regulations and unsolved problems in biosynthetic pathways.