This report summarizes recent literature relevant to the effects of terrorism on children's mental health. The paper addresses three aspects of this topic. In the first section of the paper, data are reviewed concerning the relationships among stress, trauma, and developmental psychopathology. A particular emphasis is placed on associations with indirect forms of trauma, given that terrorism involves high levels of indirect trauma. Second, the paper delineates a set of key principles to be considered when considering ways in which the effects of terrorism on children's mental health can be minimized. Third, data are reviewed from studies in developmental psychobiology. These data are designed to illustrate the mechanisms through which children exhibit unique effects in the wake of traumatic circumstances.