You can use the Keyboard pane of Terminal preferences to set the behavior of the keyboard in Terminal.
Settings list
To modify a setting, select it from the list, and then select from the options in the Settings preference pane.
To create a new setting, click the Add (+) button.
To delete a setting, select it in the Settings list, and then click the Delete (-) button.
To duplicate a setting, select it in the Settings list, and then choose Action menu > Duplicate Settings.
To restore a setting to the standard default configuration, select it in the Settings list, and then choose Action menu > Restore Defaults.
To use a setting created on another computer, choose Action menu > Import, and then select the Terminal settings file from the dialog.
To export a setting, choose Action menu > Export, and then select the location where you want to save the file.
Function key list
To modify a key, select it and click the Edit button, change the key settings, and then click OK.
Add (+) button
To create a new function key, click the Add (+) button, located under the function key list.
Delete (-) button
To delete a function key, select a key in the list and click the Delete (-) button located under the function key list.
Use option as meta key
To have the Option key on the keyboard act as a meta key, select the “Use option as meta key” checkbox. This is useful for systems running X11 and for some text editors.