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The edible fungi have both edible and medicinal functions, in which terpenoids are one of the most important active ingredients. Terpenoids possess a wide range of biological activities and show great potential in the pharmaceutical and healthcare industries. In this review, the diverse biological activities of edible fungi terpenoids were summarized with emphasis on the mechanism of anti-cancer and anti-inflammation. Subsequently, this review focuses on advances in knowledge and understanding of the biosynthesis of terpenoids in edible fungi, especially in the generation of sesquiterpenes, diterpenes, and triterpenes. This paper is aim to provide an overview of biological functions and biosynthesis developed for utilizing the terpenoids in edible fungi. [ABSTRACT FROM AUTHOR]