A growing body of scholars and policymakers have raised concerns that failed and failing states pose a danger to international security because they produce conditions under which transnational terrorist groups can thrive. This study devises an empirical test of this proposition, along with counter-theories, using simple descriptive statistics and a time-series, cross-national negative binomial analysis of 197 countries from 1973 to 2003. It finds that states plagued by chronic state failures are statistically more likely to host terrorist groups that commit transnational attacks, have their nationals commit transnational attacks, and are more likely to be targeted by transnational terrorists themselves.