Based on a country panel from 1995 to 2013, this study examines the relationship between state failure and transnational terrorism with respect to perpetrator’s proximity to the target and logistical complexity of attacks. Using concentration curves and generalized estimating equation negative binomial models, the study shows that failed states experience significantly more transnational terrorism when the perpetrators are from the home country. But these states do not produce terrorists who cross borders and carry out attacks in other countries, neither do they attract foreign perpetrators. The latter suggests that conditions in failed states present major operational challenges to foreign terrorists. State failure also causes more logistically complex attacks due to lack of effective counterterrorism measures by failed states. The main results hold true for both relative and dichotomous measures of state failure.