The incidence of domestic terrorism varies dramatically across the states of India. This study demonstrates that important state-level differences in political party systems help to explain different levels of terrorist activity within the Indian states. Analysis of statistical data on terrorist attacks as well as other political, social, and macroeconomic indicators of the twenty-seven Indian states and the Delhi municipality from 1998 to 2006, determines that Indian states characterized by multiparty electoral competition, a diffusion of legislative seat distribution among parties, and minority party government are more likely to experience terrorist attacks than states with stable, two-party systems and majority party rule. These party system features increase the likelihood that terrorism will occur because they nurture the political conditions under which terrorism is likely to flourish and because they impair government ability to craft coherent and effective responses to terrorism.