Terpenes and their derivatives comprise a diverse group of natural compounds with versatile medicinal properties. This article elucidates the general characteristics of fungal terpenes and terpenoids, encompassing their structure and biogenesis. The focal point of this work involves a comprehensive overview of these compounds, highlighting their therapeutic properties, mechanisms of action, and potential applications in treating specific skin conditions. Numerous isolated terpenes and terpenoids have demonstrated noteworthy anti-inflammatory and anti-microbial effects, rivalling or surpassing the efficacy of currently employed treatments for inflammation or skin infections. Due to their well-documented antioxidant and anti-cancer attributes, these compounds exhibit promise in both preventing and treating skin cancer. Terpenes and terpenoids sourced from fungi display the capability to inhibit tyrosinase, suggesting potential applications in addressing skin pigmentation disorders and cancers linked to melanogenesis dysfunctions. This paper further disseminates the findings of clinical and in vivo research on fungal terpenes and terpenoids conducted thus far.