Heavy rainfall is the main factor inducing the failure of loess slopes. However, the failure mechanism and mode of terraced loess slopes under heavy rainfall have not been well investigated and understood. This paper presents the experimental study on the deformation and failure of terraced loess slopes with different gradients under extreme rainfall conditions. The deformation and failure processes of the slope and the migration of the wetting front within the slope during rainfall were captured by the digital cameras installed on the top and side of the test box. In addition, the mechanical and hydrological responses of the slope, including earth pressure, water content, pore water pressure, and matric suction, were monitored and analyzed under rainfall infiltration and erosion. The experimental study shows that the deformation and failure of terraced loess slopes under heavy rainfall conditions exhibit the characteristic of progressive erosion damage. In general, the steeper the slope, the more severe the deformation and failure, and the shorter the time required for erosion failure. The data obtained from sensors embedded in the slope can reflect the mechanical and hydraulic characteristics of the slope in response to rainfall. The earth pressure and pore water pressure in the slope exhibit a fluctuating pattern with continued rainfall. The failure mode of terraced loess slopes under extreme rainfall can be summarized into five stages: erosion of slope surface and formation of small gullies and cracks, expansion of gullies and cracks along the slope surface, widening and deepening of gullies, local collapse and flow-slip of the slope, and large-scale collapse of the slope. The findings can provide preliminary data references for researchers to better understand the failure characteristics of terraced loess slopes under extreme rainfall and to further validate the results of numerical simulations and analytical solutions.