Terephthalic acid (TPA) is an important industrial chemical currently produced by energy intensive and potentially hazardous p-xylene (pX) oxidation process. Here we report the development of metabolically engineered Escherichia coli system for biological transformation of pX into TPA. The engineered E. coli strain harbours a synthetic TPA pathway optimized through manipulation of expression levels of upstream and downstream modules. The upstream pathway converts pX to p-toluic acid (pTA) and the downstream pathway transforms pTA to TPA. In a two-phase partitioning fermentation, the engineered strain converts 8.8 g pX into 13.3 g TPA, which corresponds to a conversion yield of 96.7 mol%. These results suggest that the E. coli system presented here might be a promising alternative for the large-scale biotechnological production of TPA and lays the foundations for the future development of sustainable approaches for TPA production.