Terraform Best Practices to Get the Most Out of the IaC Tool

What you'll learn: Practical Terraform best practices that connect module design, project layout, state management, security, AWS, versioning, and infrastructure as code strategy so that your Terraform deployments stay predictable, reviewable, and friendly to future configuration maintainers.

Terraform is the glue between cloud providers, underlying APIs, and the reality of your cloud infrastructure. However, when teams treat it as an afterthought, copying random examples from Terraform documentation and tweaking them until something finally applies, they build systems that are hard to reason about, hard to share, hard for new hires to learn, and easy to break.

A healthier approach starts from a simple observation. Terraform configurations are long-lived assets that need structure, naming, and consistency, just as application code does.

Once you accept that, Terraform best practices stop being abstract rules and instead become a practical way to keep your tf files, Terraform modules, and state files boring and reliable, so you can move faster without the stress.

The rest of this guide shows you how to get there, bringing together general Terraform infrastructure as code best practices with concrete advice on module design, Terraform state management best practices, Terraform AWS best practices, and even Terraform commit message best practices so your Git history remains a usable audit log instead of a junk drawer.

7 key Terraform best practices for any use case

These are the foundations that apply to every project, no matter which cloud providers you target or how large your environment becomes.

Treat Terraform as real software, not one-off glue

Your first habit might be to treat Terraform usage as software engineering work. That means keeping Terraform code in version control, enforcing reviews, running terraform validate on every change, and wiring Terraform plan and apply into CI using tools such as Terrateam – along with our dedicated guide on Terraform pre-commit hooks, which makes it trivial to run formatting and validation before anything is committed.

When you approach Terraform infrastructure-as-code best practices in this way, you naturally care about the dependency graph Terraform builds, because you know it encodes the desired behavior of your system.

You care about how Terraform references are written, because you want to simplify references and avoid deeply nested expressions that make it impossible to see which resource type depends on which. You start thinking about how configuration maintainers who join later will read and understand this code, not just how to get an instance directly deployed today.

This mindset change also pushes you to align with Terraform modules' best practices rather than sprinkling resources everywhere.

Even a simple module that wraps a VPC or a database gives you a reusable unit with its own variables, outputs, and tests, so you can share the same code across teams instead of having people rebuild the same resources slightly differently and in more error-prone ways.

Make variables explicit and meaningful

Terraform is at its best when the interface between modules is explicit. That starts with input variables. Give every variable a clear description, use types to model expectations, and provide default values where they genuinely reduce friction.

When you provide default values, do it intentionally, not as a reflex. Empty defaults and empty strings often hide missing configuration that should be required, and they make it harder to keep the expected input unit clear when different teams call the same module.

You will usually combine input variables with local variables. Locals are a great place to parameterize values derived from multiple inputs, to centralize a naming convention, or to compute environment-independent values that should not be overridden by callers.

Boolean variables deserve extra care, since they are easy to misread. Instead of a vague enabled flag, use more meaningful values, such as create_load_balancer, so the intent stays visible.

The practice of shaping interfaces carefully is one of those Terraform organizational best practices that sounds cosmetic but quietly prevents production incidents. When the calling module can read a variable name, see its type, default values, and description, and immediately infer the desired behavior, that practice ensures consistency and keeps surprises low.

Design outputs that compose cleanly

Outputs are the other half of the module boundary. Good outputs reference attributes that callers realistically need, not internal implementation details. You want output reference attributes that callers can pass onwards without having to know how you built them.

When you pass outputs directly into another module, you implicitly define a contract. That contract should be stable and boring.

Instead of forcing callers to reference a whole instance directly, prefer outputs that expose specific values such as ARNs, hostnames, or security group IDs. This style keeps your dependency graph cleaner and makes refactors less painful, since you can change how a resource name or resource type is constructed inside the module while keeping the same output contract.

This is also where data sources and data resources should be considered. Collecting data resources from your cloud providers to look up existing infrastructure is powerful, but it should be deliberate. Use data sources where you truly have to integrate with existing static files or external files, not as a shortcut for avoiding clear outputs between modules.

Keep the configuration layout boring and discoverable

Terraform project structure best practices all converge on one goal, which is to make it obvious where a new engineer should look for anything. They should know which folder contains Terraform files, which tfvars files encode environment-specific values, and which module is the primary entry point for each system.

A common pattern is to keep root modules in a top-level envs or stacks directory, with one separate directory per environment. Those root modules contain minimal glue Terraform configurations that assemble reusable modules and wire them to environment-specific values from tfvars files. Each reusable module lives in its own directory with its own files, usually under modules, and exposes clearly documented input variables and outputs.

Terraform file structure best practices and Terraform directory structure best practices generally match this pattern, even if documentation examples sometimes show everything in a single directory for brevity. You can absolutely adapt this to your context.

Placing shared Terraform templates in a dedicated folder is a valid preference, as long as configuration files remain discoverable and the primary entry point for each stack stays obvious.

Separate environments and state deliberately

One of the oldest Terraform state file management best practices is still the simplest. Separate environments should have separate state files. Production and staging should never share state, even if they currently deploy the same resources with the same code.

Doing this cleanly usually means using a remote backend so you can store remote state centrally, rather than relying on local static files on someone's laptop. Backends such as S3 with DynamoDB locking, Terraform Cloud, or similar systems give you locking, history, and encryption so your state files can be treated as first-class assets. We walk through a complete setup in our guide to Terraform State on AWS.

Within a given environment, you can decide whether to keep everything in a single state or split it into multiple separate state files. Both patterns can be a valid preference, but you should decide intentionally. Splitting by domain can help avoid conflicts when teams work on unrelated parts of the system, while a monolithic state keeps your dependency graph simpler. Either way, the moment you push state to a remote backend, you gain the ability to connect Terraform deployments to CI, to drift detection, and to policy enforcement in systems like Terrateam.

Automate Terraform with scripts, but keep them honest

Most teams eventually wrap Terraform in custom scripts so that people run Terraform with consistent arguments, backends, and workspaces. This is healthy, as long as those helper scripts accept arguments rather than hard-coding everything, and as long as you document helper scripts clearly in your README. A good helper script will run Terraform, load the right configuration files, select the correct workspace, and maybe run Terraform validate as part of its flow.

If you're still experimenting from your laptop, our guide to running Terraform locally shows how to do that safely before you wire everything into CI.

The same applies to startup scripts that you run before planning or applying.

You might have startup scripts loaded from a shared repo that export environment-independent values, or that fetch secrets into external files before Terraform reads them. These should be documented, tested, and boring. If you use Terraform templates to generate pieces of configuration or to render static files, keep the logic simple and ensure that configuration maintainers in the future can still reason about what happens when they run Terraform.

Over time, the combination of helper scripts, pre-commit hooks, and CI pipelines becomes more important than any single syntax choice. Our own best practices for CI/CD pipelines build on this idea and show how to push plan and apply into Git workflows so nobody has to remember arcane command sequences.

Prefer clarity over cleverness in HCL

Terraform's HCL (HashiCorp Configuration Language) gives you plenty of escape hatches. You can use dynamic blocks to generate resources, deeply nested for expressions, and clever local variables to reuse the same resources in different configurations. These tools are powerful, but they are easy to overuse.

In practice, Terraform module best practices lean toward clarity:

• Use dynamic blocks when you genuinely need to map over a collection, not to compress three lines into one
• Keep the structure of each entire module understandable in a single sitting
• Avoid packing too much logic into local variables, where it becomes difficult to trace which value a calling module is actually sending

When you feel tempted to push HCL to its limits, remember the goal: Terraform best practices are not about showing off tricks; they are about building Terraform configurations that feel boring, predictable, and easy to debug when a future incident wakes you up at 2 am.

Terraform module, project, and folder best practices

Module design is where many of the more polarized Terraform opinions show up.

Most official guidance on Terraform modules best practices, including Hashicorp's, recommends keeping modules small, focused, and reusable. That means one simple module per concern, rather than a mega module that tries to set up an entire application stack in one go.

There are many ways to organize your Terraform repository. At the end of the day, it's up to you. Although HashiCorp has an opinion, Terraform does now.

Let's start with a simple way to organize files:

.
└── terraform
    ├── main.tf
    └── variables.tf

1 directory, 2 files

We only have two files in this example:

main.tf: Terraform resources, data sources, state, etc.

variables.tf: Variable definitions

This is a reasonable way to organize your first Terraform repository when you're first getting started. However, you'll quickly realize that this loose organization can become unwieldy.

Now for a more advanced method of organization:

.
└── terraform
    ├── components
    │   ├── backend
    │   │   ├── env
    │   │   │   ├── dev.tfvars
    │   │   │   └── production.tfvars
    │   │   └── main.tf
    │   └── frontend
    │       ├── env
    │       │   ├── dev.tfvars
    │       │   └── production.tfvars
    │       └── main.tf
    └── modules
        └── vpc
            ├── main.tf
            ├── outputs.tf
            ├── subnets.tf
            └── variables.tf

8 directories, 10 files

Separating your Terraform code out into multiple directories and multiple environment files sets you up for long-term success as you grow your repository.

A healthy module tree usually has a handful of root modules that act as entry points for environments or systems. These root modules wire together several private modules that sit under a modules folder and expose clean interfaces.

Each private module owns its own variables and outputs, keeps its own files under a separate directory, and declares clear boundaries so that a calling module never has to reach inside and touch internal resources.

Terraform module structure best practices and Terraform module best practices both point to the same pattern.

Within a module, you group Terraform resources logically, split Terraform files by purpose rather than by resource type name, and keep the entire module self-contained. You might have configuration files such as variables.tf, outputs.tf, and main.tf, plus optional external files for templates or static files.

Some teams prefer one combined file per module, others prefer multiple tf files grouped by concern. Either way is a valid preference, as long as you stay consistent inside the repository.

Folder layout ties into this.

Terraform folder structure best practices and Terraform directory structure best practices both favor a clear top-level separation between modules and environments, with an optional global or shared folder for cross-cutting infrastructure.

You might also keep separate environments in their own repositories when teams are large, or in a single repository when you want stronger guarantees that the same code runs everywhere.

Both can work, as long as your Terraform organization best practices are written down and followed, so people know where to add new systems and how to extend existing ones.

Finally, remember versioning.

Terraform module versioning best practices suggest tagging releases of shared modules, pinning versions in root modules, and using semantic versioning so everyone knows when a change is safe. Terraform versioning best practices extend this to Terraform itself, where you pin the Terraform binary version in configuration and in CI, so new team members and pipelines create the same plans rather than conflicting ones.

Terraform state management best practices

State is Terraform's memory. It tracks which Terraform resources exist, how they map to real cloud infrastructure, and which values were last seen. Terraform state management best practices start with the basics you already saw, such as using a remote backend and keeping separate state files for separate environments, yet they extend further into how you structure state around teams and services.

One of the core Terraform state file best practices is to avoid mixing unrelated systems into a single state file. When two teams need to change different parts of a stack at different cadences, splitting state helps avoid conflicts, keeps plans smaller, and reduces the blast radius of mistakes.

Terraform state file management best practices also include:

• Making regular backups
• Locking to prevent concurrent applies
• Adding encryption so that sensitive values stored in state files are protected

Workspaces are another dimension. One Terraform workspaces best practice is to avoid using workspaces as a substitute for separate environments such as staging and production, especially when environment-specific values differ significantly.

Workspaces are more suitable when you have many similar deployments that genuinely share the same configuration – for example, per-tenant stacks where only a small set of inputs change. Even then, you should still treat each workspace's state separately and understand how your remote state backend stores and names them.

As your usage grows, state management also intersects with Terraform deployments and CI. Terraform best practices 2025 increasingly assume that nobody is running terraform apply from a laptop. Instead, they rely on automated runs, where remote state access, locking, and permissions are wired into CI jobs, and human review focuses on the plan diff rather than on manual command entry.

Tools like Terrateam lean heavily on this model, so you can tie state access back to Git history and policy decisions.

Terraform security best practices

Security shows up everywhere in Terraform, which is why Terraform security best practices do not look like a separate checklist so much as a set of constraints on how you structure everything else.

Basic guardrails such as never committing secrets into tf files, keeping provider credentials in external files or environment variables, and encrypting state are non-negotiable.

Beyond that, you want your modules and configuration files to make it hard to do the wrong thing:

• Provide meaningful values for security-related variables such as CIDR ranges and IAM policies
• Do not hide important settings behind obscure names or other predefined values
• Use input variables with types that guide people away from insecure choices
• When possible, use Terraform documentation examples as a starting point, but tailor them to your own threat model.

Automated checks help here as well.

Running terraform validate is necessary but not sufficient. You can add static analysis tools, integrate them into helper scripts and CI, and use policies that inspect the plan for dangerous changes. Meanwhile, tools like tfsec and Checkov can also help with security scans.

Your custom scripts and startup scripts can, for example, forbid public S3 buckets by default or require explicit overrides with additional context when someone absolutely has to make an exception. Over time, a combination of code review, branch protections, and policy-driven checks does far more to secure Terraform usage than any single trick.

Terraform AWS best practices that scale beyond one account

AWS remains one of the most common targets for Terraform, which means Terraform AWS best practices tend to show up in real systems long before people formalize them.

Many of them are about structure and naming, such as using a consistent naming convention for AWS resources, where each resource name captures the environment, system, and role, as well as parameterizing values such as tags and region so you can reuse modules across accounts without invasive edits.

Infrastructure patterns also matter.

A classic example is a single Terraform load balancer shared across multiple services in one environment. Instead of spinning up a new load balancer for every application, which is expensive and noisy, you create one and attach target groups per service. When your modules support this, you avoid duplicating the same resources and keep routing behavior easier to reason about.

AWS-specific practices around state and backends are also important. Using an S3 remote backend with DynamoDB locking has effectively become a Terraform AWS best practice, because it makes remote state reliable and conflicts rare.

AWS tagging also deserves attention. Defining default tags at the provider or module level and enforcing them as part of your Terraform configurations makes allocation and compliance simpler. It is far better to centralize default tags in one place than to rely on every module author remembering them manually.

Terraform versioning best practices for stable deployments

Versioning is often an afterthought until something breaks. These Terraform versioning best practices treat it as a first-class concern:

• Pin your Terraform version in configuration using required_version
• Keep CI agents aligned
• Plan upgrades deliberately rather than letting everyone drift.

On the module side, Terraform module versioning best practice is to publish shared modules with semantic versions, documenting breaking changes, and requiring callers to bump versions explicitly. This process is especially important when multiple teams depend on shared infrastructure modules such as VPCs, databases, or queues. Without clear versions, a seemingly harmless change to a module can suddenly impact dozens of stacks.

Seen from a higher level, Terraform best practices 2025 assume that versioning is part of your delivery story. You align Terraform releases with broader platform changes, you test upgrades in separate non-production environments before rolling them out, and you use tags in Git to correlate module versions with specific Terraform deployments. Over time, this gives you a much clearer sense of when regressions entered the system and how to roll back safely.

Terraform infrastructure as code best practices for long-lived systems

When people talk about infrastructure as code, they often focus on the code part and forget the infrastructure reality behind it. Terraform IaC best practices bridge that gap by keeping the codebase aligned with what actually runs.

Drift detection, regular terraform plan runs, and automated alerts when reality diverges from configuration all help, but they only work well when your structure is solid.

A good method is to use Terraform templates and dynamic blocks sparingly to express repeating structures, while ensuring that each environment has explicit tfvars files with environment-specific values such as CIDR ranges and instance sizes.

Environment-independent values, such as organization-wide DNS zones or SSO settings, can live in shared modules so they are not accidentally forked by individual teams.

You should also think carefully about how Terraform usage fits into broader delivery practices. When you parameterize values thoughtfully, keep configuration files readable, and align your Terraform organization best practices with how teams are structured, you reduce friction so that people naturally choose the paved path instead of improvising their own.

This preparatory work is not about dictating one true pattern for everyone, it's about making the safest and most maintainable path the one with the least resistance.

Terraform directory structure best practices

Directory structure might feel cosmetic, yet it quietly influences everything from onboarding to incident response. Terraform directory structure best practices recommend that you use a separate directory for each major environment or stack, treat root modules as lightweight wiring, and keep reusable modules in their own namespace.

In practice, this means you will often see a top-level layout with folders for envs, modules, and possibly global. Under envs, each environment, such as production or staging, has its own root modules and its own tfvars files.

Under modules, each module has a dedicated folder containing its Terraform files, and optionally supporting external files such as templates or static files. This pattern reduces the chance that changes intended for one environment accidentally bleed into another, especially when combined with separate state files and per-environment remote state.

At the same time, you can accommodate local preferences.

Some teams like to keep configuration files for each stack in their own repositories, while others prefer a mono repo. As long as the primary entry point for each stack is obvious, and as long as people know which directory corresponds to which state, the structure will support you instead of fighting you.

Terraform commit message best practices

Terraform commit message best practices are easy to overlook, yet they determine whether your Git history is a rich source of additional context or a graveyard of meaningless messages.

Since Terraform changes directly affect cloud infrastructure, commit messages should describe the desired behavior in plain language. Instead of writing fix, prefer messages such as tighten security group for api service or add dev workspace for billing stack.

Good messages pair well with the plan output stored in CI. When you can see both the human intent and the detailed diff for a given change, audits and incident reviews become significantly easier. This visibility is especially powerful when combined with systems like Terrateam that capture both plan logs and apply events in one place.

You can also encode process requirements into your workflow.

For example, you might require that all changes touching security groups or IAM policies include a note about why that change is necessary, or that changes adding new cloud infrastructure reference a ticket ID.

Over time, the combination of careful messages, consistent structure, and automated checks turns your history into a narrative of how the system evolved rather than a series of blind edits.

Terrateam keeps best practices front of mind

Best practices matter only if they show up in daily work.

It's one thing to say that you'll keep separate environments with separate state files, pin module versions, use reusable modules, and avoid conflicts through smart structure. It's another to wire all of this into a workflow where people naturally run Terraform through helper scripts, where startup scripts loaded in CI prepare the right context, where terraform validate and other checks run automatically, and where only reviewed, tested changes ever reach production.

Terrateam exists to make that second world normal.

By turning GitHub into your infrastructure control plane, orchestrating plans and applies as part of pull requests, and integrating with policy engines, Terrateam helps you enforce Terraform best practices without slowing teams down. You still shape modules, variables, tfvars files, and state structures according to your needs, but you do so in a system that treats Terraform as real software and treats your cloud as something too important to manage from a laptop shell.

If you want Terraform configurations that remain boring and dependable even as your systems grow, and if you want a workflow that makes the safe path the easiest path, you can sign up for Terrateam today at https://terrateam.io/signup and start turning these practices into muscle memory across your organization.

Conclusion

With Terraform, you can create a strong foundation to start building out infrastructure resources in a repeatable and collaborative way. It's up to the user to decide on the best way to organize Terraform code workflow, so create a solution that works best for you, your team, and your business.

If you want more guidance on Terraform best practices, and you're the type of person who likes to sit down and read a book before getting started, then this book is for you: Terraform: Up & Running, 3rd Edition is a great kickstart for a new Terraform user.

This book covers many things, like DevOps concepts in general and how to get started with Terraform. I'd even recommend this book for more advanced users, as the book covers some really good in-depth topics.

Having this book by your side during your Terraform journey is a great resource, putting you in a good place when it comes to instigating best practices with the IaC tool.