For the 1977 and 1981 general elections, Terlouw served as lead candidate, and following a cabinet formation with Christian democratic Leader Dries van Agt and Labour Leader Joop den Uyl formed the second Van Agt cabinet, with Terlouw appointed as Deputy Prime Minister and Minister of Economic Affairs, taking office on 11 September 1981.

Following his retirement Terlouw continues to be active as an advocate and activist for social norms, sustainable development, animal welfare and for more European integration.

Terlouw has been active as a prolific author since the 1970s, having written more than dozen young adult fiction books: his 1972 novel Winter in Wartime was adapted and released as a feature film in 2008.

[citation needed] After graduating from Utrecht University, he worked as a physics researcher in the Netherlands, the United States, and Sweden.

[citation needed] Terlouw wrote 24 children's books, most notably Winter in Wartime (Oorlogswinter, 1972) and How to Become King (Koning van Katoren, 1971), both of which won the Gouden Griffel and have been made into motion pictures directed by Martin Koolhoven.