The emergence of the Abu Sayyaf Group (ASG) in the early 1990s represented the radicalization of the Filipino Muslim separatist movement. Despite the initial success of the joint Philippine and U.S. Balikatan exercise against the Abu Sayyaf in 2002, the ASG has continued to carry out attacks on lightly guarded or "soft" targets, the same way international terrorist groups have been known to do. The anarchic region of Central Mindanao has become a training base for Southeast Asian terror organizations and a refuge for Abu Sayyaf. The war on terrorism has changed the lives of the Filipinos and strained the capacities of the government. Over the years, the Philippines has fought terrorism in many ways. It has retaliated militarily, prosecuted terrorists, preempted terrorist attacks, implemented defensive measures, and addressed some of the causes of terrorism. To some degree, all suffer from limited effectiveness and applicability. This thesis analyzes the Philippine response to terrorism and determines how it should develop an effective strategy to counter terrorism. This study also discusses the government organizational structure and the problems faced by the Philippine government agencies in addressing the terrorism specifically posed by Abu Sayyaf. In addition, this thesis presents a case study of Abu Sayyaf by analyzing its organizational and operational tools in the maintenance of its terrorist capability. Finally, this thesis examines the government bureaucracy and its capability to respond to the threats posed by terrorism.