As a youth, he was a member of the Kiheitai militia from 1864, and fought in the Boshin War against the Tokugawa shogunate from 1867, most notably at the Battle of Hakodate.

After the victory at Hakodate, he travelled to Kyoto, where he joined the Ministry of War and was drilled by French instructors in Western weaponry and tactics.

He was appointed to the staff of the new Imperial Japanese Army Academy in 1873. he fought in the Satsuma Rebellion in 1877 and was injured and lost his right hand during the Battle of Tabaruzaka.

Following the assassination of former Prime Minister Itō Hirobumi in Harbin by a Korean nationalist, An Jung-geun in October 1909, Terauchi was appointed to replace Sone Arasuke as the third and last Japanese Resident-General of Korea in May 1910.

In this position, he reported directly to the Emperor and as proconsul had wide-ranging powers ranging from legislative, administrative, and judicial to effect changes and reforms.

Ownership was denied to those who could not provide such written documentation (mostly lower class and partial owners, who had only traditional verbal "cultivator rights").

The government has been reorganized, courts have been established, the laws have been revised, trade conditions have been improved and commerce has increased.

Agriculture has been encouraged by the opening of experiment stations, railroads have been constructed from the interior to the sea-coast, and harbours have been dredged and lighthouses erected.

[3] In June 1916, Terauchi he received his promotion to the largely ceremonial rank of Gensui (or Field Marshal).

He oversaw the Nishihara Loans (made to support the Chinese warlord Duan Qirui in exchange for confirmation of Japanese claims to parts of Shandong Province and increased rights in Manchuria) and the Lansing–Ishii Agreement (recognizing Japan's special rights in China).

Terauchi upheld Japan's obligations to the United Kingdom under the Anglo-Japanese Alliance in World War I, dispatching ships from the Imperial Japanese Navy to the South Pacific, Indian Ocean and Mediterranean, and seizing control of German colonies in Qingdao and the Pacific Ocean.