In this review, we summarize recent progress in studying three main classes of prenyltransferases: (a) isoprenyl pyrophosphate synthases (IPPSs), which catalyze chain elongation of allylic pyrophosphate substrates via consecutive condensation reactions with isopentenyl pyrophosphate (IPP) to generate linear polymers with defined chain lengths; (b) protein prenyltransferases, which catalyze the transfer of an isoprenyl pyrophosphate (e.g. farnesyl pyrophosphate) to a protein or a peptide; (c) prenyltransferases, which catalyze the cyclization of isoprenyl pyrophosphates. The prenyltransferase products are widely distributed in nature and serve a variety of important biological functions. The catalytic mechanism deduced from the 3D structure and other biochemical studies of these prenyltransferases as well as how the protein functions are related to their reaction mechanism and structure are discussed. In the IPPS reaction, we focus on the mechanism that controls product chain length and the reaction kinetics of IPP condensation in the cis-type and trans-type enzymes. For protein prenyltransferases, the structures of Ras farnesyltransferase and Rab geranylgeranyltransferase are used to elucidate the reaction mechanism of this group of enzymes. For the enzymes involved in cyclic terpene biosynthesis, the structures and mechanisms of squalene cyclase, 5-epi-aristolochene synthase, pentalenene synthase, and trichodiene synthase are summarized.