The invention relates to microbial terpene production. Known methods for microbial production of terpenes are mostly based on the direct conversion of sugars. Therefore alternative substrates, in particular alternative carbon sources, for use in microbial terpene production were desirable. The invention relates to a methylotrophic bacterium containing recombinant DNA coding for at least one polypeptide with enzymatic activity for heterologous expression in said bacterium, wherein said at least one polypeptide with enzymatic activity is selected from the group consisting an enzyme of a heterologous mevalonate pathway, a heterologous terpene synthase and optionally a heterologous synthase of a prenyl diphosphate precursor. The invention further relates in particular to a method for de novo microbial synthesis of sesquiterpenes or diterpenes from methanol and/or ethanol.