Yarrowia lipolytica has emerged as an important non-model host for terpene production. However, three main challenges remain in industrial production using this yeast. First, considerable knowledge gaps exist in metabolic flux across multiple compartments, cofactor generation, and catabolism of non-sugar carbon sources. Second, many enzymatic steps in the complex-terpene synthesis pathway can pose rate-limitations, causing accumulation of toxic intermediates and increased metabolic burdens. Third, metabolic shifts, morphological changes, and genetic mutations are poorly characterized under industrial fermentation conditions. To overcome these challenges, systems metabolic analysis, protein engineering, novel pathway engineering, model-guided strain design, and fermentation optimization have been attempted with some successes. Further developments that address these challenges are needed to advance the Yarrowia lipolytica platform for industrial-scale production of high-value terpenes, including those with highly complex structures such as anticancer molecules withanolides and insecticidal limonoids.