Artemisinin is a sesquiterpene lactone isolated from the aerial parts of Artemisia annua L. plants. Besides being currently the best therapeutic against both drug-resistant and cerebral malaria-causing strains of Plasmodium falciparum, the drug has also been shown to be effective against other infectious diseases including schistosomiasis and hepatitis. More recently, it has also been shown to be effective against numerous types of tumors. Although chemical synthesis of artemisinin is possible, it is not economically feasible. The relatively low yield (0.01–0.8%) of artemisinin in A. annua is a further serious limitation to the commercialization of the drug. Therefore, the enhanced production of artemisinin either in cell/tissue culture or in the whole plant of A. annua is highly desirable. A better understanding of the biochemical pathway leading to the synthesis of artemisinin and its regulation by both exogenous and endogenous factors is essential for facilitating increased yield. Two genes of the artemisinin biosynthetic pathway have now been identified. This critical review covers recent developments related to the biosynthesis of this important compound and related terpenoids, their regulation, and the production of these compounds both in vitro and in whole plants.