The functionalization of terpenes using cytochrome P450 enzymes is a versatile route to the production of useful derivatives that can be further converted to value-added products. Many terpenes are hydrophobic and volatile making their availability as a substrate for P450 enzymes significantly limited during microbial production. In this study, we developed a strategy to improve the accessibility of terpene molecules for the P450 reaction by linking terpene synthase and P450 together. As a model system, fusion proteins of 1,8-cineole synthase (CS) and P450_cin were investigated and it showed an improved hydroxylation of the monoterpenoid 1,8-cineole up to 5.4-fold. Structural analysis of the CS-P450_cin fusion proteins by SEC-SAXS indicated a dimer formation with preferred orientations of the active sites of the two domains. We also applied the enzyme fusion strategy to the oxidation of a sesquiterpene epi-isozizaene and the fusion enzymes significantly improved albaflavenol production in engineered E. coli. From the analysis of positive and negative examples of the fusion strategy, we proposed key factors in structure-based prediction and evaluation of fusion enzymes. Developing fusion enzymes for terpene synthase and P450 presents an efficient strategy toward oxidation of hydrophobic terpene compounds. This strategy could be widely applicable to improve the biosynthetic titer of the functionalized products from hydrophobic terpene intermediates.