"We're not here to have fun, we want to progress," said Terzic at the pre-match press conference in Eindhoven, adding that he was "very optimistic" forward Donyell Malen would make his return from injury on Tuesday.
Progression against an opponent from outside the top-five leagues is a must for Terzic, who narrowly escaped the sack during a Dortmund crisis meeting in December.
But Dortmund are having a difficult domestic campaign.
Having lost last season's title on goal difference on the final day of the season, Dortmund are fourth, 17 points behind leaders Leverkusen and clinging to the last Champions League qualifying place by a point.
PSV on the other hand are unbeaten in the Eredivisie, dropping just four points in 22 games under former Dortmund manager Peter Bosz.
Terzic said his side "have huge respect for PSV, they are incredibly self-confident."
In Europe, Dortmund have impressed, topping a Champions League group that contained Paris Saint-Germain, AC Milan and Newcastle.
Malen, who missed the weekend's game, joined PSV to Dortmund in 2021.
It will be a night of reunions as Bosz faces the club that gave him less than half a season before sacking him in 2017.
"It was a fairly short period and was more than six years ago. I have to dig deep into my memory," he said.
Bosz, who had a two-and-a-half year stint at Bayer Leverkusen after leaving the Westfalenstadion, said most of the players he coached at Dortmund were no longer around.
"I'm most looking forward to seeing the people who are still there, like Marco Reus, but especially Julian Brandt - I know him from Leverkusen.
"He's a really good player. I'm happy to see him again. I hope he doesn't play against us."
