Terry, who also starred in basketball and golf at New Brighton, received a baseball scholarship from the University of Arizona in 1977. In three years as a Wildcat, he had a phenomenal collegiate career. He hit .340 as a freshman and ended with his being named an All American in 1980. That year, he helped lead Arizona to the NCAA title, was named College Player of the Year, and received the Golden Spikes Award.

Drafted by Montreal in June of 1980, he signed with the Expos and was in the major leagues by the next season. Montreal made the playoffs that year and Terry hit .333 in the postseason. His best year was 1984 when he hit .346 but a knee injury cut short his season and he did not qualify for consideration for the batting title because he did not have sufficient at bats.

After five seasons with Montreal, Terry went on to play one season each with the Chicago Cubs, Cincinnati, and Cleveland, and two with Milwaukee. His overall batting average for ten years was .274. One of the highlights of his career was spoiling a no hit bid by Nolan Ryan with an eighth inning single in a 1989 game.

Terry turned to managing after concluding his playing days. He managed Class AA Birmingham and was named Minor League Manager of the Year in 1993. Terry managed Michael Jordan both at Birmingham and in the Arizona Fall League. After becoming manager of the Boston Red Sox in 2004, he led the team to its first World Series title since 1914, and his team has become a perennial contender for the American League East pennant. In 2007, the Red Sox swept the Colorado Rockies to earn their second World Series title in four years, and Terry became the only manager in major league history to win his first eight consecutive World Series games.

Terry started his tenure as the manager of the Cleveland Indians in the 2013 season.