Current approaches for the production of high-value compounds in microorganisms mostly use the cytosol as a general reaction vessel. However, competing pathways and metabolic cross-talk frequently prevent efficient synthesis of target compounds in the cytosol. Eukaryotic cells control the complexity of their metabolism by harnessing organelles to insulate biochemical pathways. Inspired by this concept, herein we transform yeast peroxisomes into microfactories for geranyl diphosphate-derived compounds, focusing on monoterpenoids, monoterpene indole alkaloids, and cannabinoids. We introduce a complete mevalonate pathway in the peroxisome to convert acetyl-CoA to several commercially important monoterpenes and achieve up to 125-fold increase over cytosolic production. Furthermore, peroxisomal production improves subsequent decoration by cytochrome P450s, supporting efficient conversion of (S)-(-)-limonene to the menthol precursor trans-isopiperitenol. We also establish synthesis of 8-hydroxygeraniol, the precursor of monoterpene indole alkaloids, and cannabigerolic acid, the cannabinoid precursor. Our findings establish peroxisomal engineering as an efficient strategy for the production of isoprenoids.