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The Justice League Unlimited episode " Epilogue " reveals that Terry is Bruce's biological son due to Amanda Waller's " Batman Beyond " project.
The project caused Warren McGinnis to have his reproductive DNA re-written into an exact copy of Bruce's when he went in for what he thought was a flu shot ; this would make Bruce the biological father of Terry and his younger brother Matt McGinnis, even though they were born to Warren and Mary McGinnis.
Waller even hired Andrea Beaumont, AKA: The Phantasm, one of Bruce Wayne's many past lovers, and ordered her to kill Warren and Mary as they were coming out of a movie theater with their sons, hoping to recreate the same pyschological trauma that resulted in Bruce becoming Batman within Terry or his brother, but at the last minute Beaumont abandoned the job, refusing to subject an innocent child to the same tragedy that consumed Bruce's life ( but in the end, Warren's death at the hands of a criminal still occurred, thus cementing his destiny as the next Batman ).
This twist seems to be foreshadowed in a number of Batman Beyond episodes, as references to Bruce being a father figure are occasionally made, both by Terry and other characters, as well as the similarities the two men share.
Both of Terry's parents are shown as having red hair, which is usually a recessive trait, which would make it extremely unusual for them to have biological sons with black hair.
By this point in time Terry, who was considering retiring from the role, had grown into a much larger man than he was at the beginning of the series, closer in size and build to Bruce Wayne in his prime.

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