There are different ways to do this according to different manuals of style. The main thing to do is be consistent. It is important to offset the term that is being defined or discussed by underlining or italicizing it. This is to prevent any confusion that might occur if the term is one that might be mistaken for a word that is simply functioning as part of the sentence, rather than a term under analysis. Though italicizing the term is acceptable too, if you are using any foreign language terms or phrases in your writing, standard form dictates that those must be italicized, so there can be some resultant confusion if foreign terms and words under analysis are italicized. Whichever you choose, do not capitalize the word unless it is a proper noun or falls at the beginning of a sentence. The definition itself should be enclosed in quotation marks or single quotation marks.
In the Chicago Manual of Style (Chicago: University of Chicago, 2003, 15th ed.), a translation of a foreign word or phrase should be enclosed in quotation marks or parentheses. The Chicago Manual of Style also says that when a word or phrase is used as a word, i.e., not used functionally but referred to as the word or term itself, it is either italicized or enclosed in quotation marks. The main guide is that both the word and its definition need to be set in either a different type (italic, underlined) or set inside punctuation marks (single or double quotations) so that they can be distinguished from the rest of the text.