A novel mechanism of cascaded difference frequency generation (DFG) is advanced in this article to solve the problem of low-efficiency in terahertz (THz) DFG. The cascaded DFG process is theoretically analyzed using ZnTe crystal as an example. The optimal pumping condition and crystal length is obtained, and the effects of crystal absorption, wave number mis-match and pumping intensity are investigated by solving the coupling wave equations of cascaded DFG. It is obviously seen from the calculation results that the terahertz conversion efficiency can be greatly enhanced in cascaded DFG, in which the photon conversion efficiency can even break through the Manley-Rowe limit.