Why is terrorist activity more prevalent in democracies than in nondemocracies? I argue that the main motivation for terrorist attacks in democracies is intergroup dynamics, with terrorist groups of various ideologies competing with one another for limited political influence. I conduct a cross-national, longitudinal analysis of 119 countries for the period 1975–97, using political competition as the key independent variable and the number of transnational terrorist incidents originating in the country as the dependent variable. I find preliminary support for the hypothesis that intergroup competition, motivated by the competition of the political regime, explains an increase in terrorist incidents originating in a state. Evidence also reveals a positive relationship between political competition and the number of terrorist groups that emerge within a state and a positive relationship between the density of domestic interest group participation and terrorist activity. Officials should consider intergroup dynamics to predict terrorist activities and derive effective counterterrorism policies.