You first receive your Termination Knives in Chapter 10, Hideout (there are also a few on the table near the bus). Once you start Chapter 11, [Return to] Pasadena, equip these knives in a weapon slot. To achieve a kill, approach a Terminator stealthily and use the knives with RT (right trigger). Achievement unlocked. Now don't get caught!
*Can be done on any difficulty.