The thesis of this paper is that terrorist groups like al-Qaida and its allies are instruments of a radical Islamic fundamentalist movement that is waging a New Cold War against the US and fellow democracies. The explication of this thesis involves exploring the underlying factors the radical Islamic fundamentalist effort in the New Cold War. It begins by describing the movement in terms of three characteristics: ideology, leadership and enabling environment. The discussion also highlights similarities between the current foe and the one the US faced in the first Cold War and incorporates examples of how radical Islamic fundamentalism conducts battle by proxy with democracy in Indonesia and Malaysia. This paper concludes with recommendations on how the lessons from US history, the current successes in the Indo-Malay response to terrorism, and DIME initiatives can help the democracies win the New Cold war.