The increasing importance of establishing an Islamic state (a Caliphate) among religious terrorist groups has drawn the attention of academics and policymakers towards the benefits and pitfalls of the promotion of secularization as a counterterrorism strategy. Based on the historical experiences of secularization and religionization in Iraq and its societal structures, combined with a literature review of recent developments in the region, this article discusses to what extent and how secularization may promote and/or frustrate religious terrorism in present day Iraq. It concludes that, apart from some radical elements, there seems to be ideological and political space in Iraq to consider taking a direction to a more secular system. This could reduce political tensions and subsequently frustrate religious terrorism. Implementing it in a proper model in which major religious groups feel equally represented, however, may prove to be very challenging.