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Why do some terrorist groups have greater public support than others? And how do counterterrorism policies affect their popularity? The existing literature pays little scholarly attention to how counterterrorism policies affect terrorist group strategies for building support among their constituents. This study explains how terrorist groups respond to different counterterrorism policies to keep their popular support alive. Specifically, we argue that when states implement legal counterterrorism measures, terrorist groups would be more likely to develop negative reputation building strategies because these measures tend to undermine the group’s capacity to operate and ability to recruit and fund their operation, thereby encouraging the group to adopt coercive strategies to ensure that their constituencies will keep supporting the group. When states adopt reconciliatory and nonviolent measures, terrorist groups would be incentivized to use positive reputation-building strategies in a nonviolent manner to stay at the negotiation table and seek concessions. When states use military measures, they encourage the terrorist group to develop either negative reputation-building or positive reputation-building strategies, depending on whether these measures are discriminatory or indiscriminate. We test these arguments with a time-series cross-sectional data including all Middle Eastern and North African countries in the period of 1980 to 2011 as well as qualitative data collected through semi-structured interviews. Our quantitative results as well as the insights from the interviews with military and police officers who have counterterrorism experience confirm our theoretical arguments.