In this article, we propose a new approach to an old question: How does development affect religion‐state relations? We argue that because development increases states’ ability to effectively formulate and implement policy, it will be associated with greater state regulation of religion. This stands in contrast to predominant theories that examine development's negative impact on individual religiosity while largely overlooking the impact that development may have on state institutions. We test our theory using data drawn from over 160 countries, and demonstrate that the effect of economic development on state regulation of religion is consistently positive, substantively significant, and robust to alternative measurements and the inclusion of a broad range of controls. Statistical analysis also demonstrates that the correlation between development and state regulation of religion is primarily a result of economic development's impact on state capacity, rather than social dislocation or improved coordination by religious communities. Incorporating state capacity recasts the study of religious regulation—and suggests that economic growth is unlikely to take religion off the political agenda.