Broken terminal

1. Choose Shell → New Command….

   

2. Run chsh -s /bin/bash and make sure to deselect ‘Run command inside a shell’.

   

3. Enter your user account password at the prompt to change your shell back to /bin/bash.

   

Are you running zsh? I'm seeing a similar problem while running iTerm2. It seems to be a problem with zsh and not with Terminal or iTerm2. Just started happening to me.

If you had installed zsh with Homebrew and you are having that problem, what worked for me was:

brew reinstall zsh && brew unlink zsh && brew link zsh

If you didn't install zsh with Homebrew, then ignore this :-)

Easier I think:
Download iTerm2 and brew update && brew upgrade zsh worked for me ;-)

To be able to fix my terminal/iterm2/hyper (all were broke because of broken zsh) I had to first change my terminal settings 'Shells open with' from a custom command to the default login shell

The trick from @grg didn't work for me. With these changes, I was able to update my zsh via homebrew as suggested in the other answers and all three apps worked as expected again.