States that sponsor terrorism pose one of the greatest policy and security challenges of the 21st century. Over the past decade, the United States and coalition allies have invested over a trillion dollars in the wars in Afghanistan and Iraq, both waged, in part, to end their support for terrorism. Iran's support for Hezbollah and Hamas makes negotiations over its nuclear program tremendously difficult and the prospect of an Iranian nuclear umbrella, under which these groups could operate, especially concerning. Likewise, Qaddafi's overthrow and the siege on Assad's regime in Syria have both been justified in the context of their historic support for terrorists, as well as the more recent normative concern for the repression of their people. This paper moves beyond a simple explanation of state sponsorship as covert war or way to persuade target states to concede policy objectives. Rather, it models state sponsored terrorism as a leader survival strategy that leaders choose when facing simultaneous internal and external threats. By investing a portion of the state's military power outside the control of the military and into terrorist groups and the security services that arm and train them, the leader is able to signal competency to other elites in his coalition and insulate himself from existing threats of coup d'état from the military while avoiding defeat in external conflict. Using a newly constructed dataset on state sponsorship that uses the leader-year (1968-2001) as the unit of analysis (N=5139), this study finds that many existing explanations for state sponsorship do not withstand empirical testing and that the combined level of high external threat and elevated threat of coup d'état are key determinants of a leader's decision to sponsor terrorist groups. This work has tremendous implications for US security policy as current practices, such as regime-targeted sanctions, may have the unintended effect of increasing the level of threat that the leader experiences and thus the likelihood of state sponsorship. These insights highlight a major reason why military strikes and economic sanctions are less successful than regime change for ending state sponsorship. Furthermore, it suggests that carefully reducing the external and internal levels of threat the leader faces may be the most effective method to end state sponsorship of terrorism. / text