Muslims comprise the second largest population after Hindus in South Asia. They are, however, not a monolithic community. The rise of religious fundamentalism in Pakistan and the official patronage it has got has an enormous political and security impact on the region. The terrorist campaign, sponsored by Pakistan and waged by Islamic fundamentalist groups in Jammu and Kashmir and Afghanistan, has wide implications and poses a major threat to the region. Setting up an Islamic state and Jihad are the two objectives of all fundamentalist movements. Religious parties had opposed the Pakistan movement before Independence. After Pakistan came into being, the fundamentalist parties gradually raised Islamic issues and the demand for making Pakistan an Islamic state. Though successive governments in Pakistan used Islamic parties for political objectives, it was under General Zia-ul Haq that a campaign was launched from the top to ‘islamise’ Pakistan. Gen. Zia’s policies led to the growth of Islamic and sectarian violence in the country. Pakistan’s intervention in Afghanistan and the Islamic policies at home gradually turned the country into the epicentre of global Islamic militancy. The Mullah-Military alliance has been strengthened during the Musharraf regime. The recent growth of Islamic fundamentalism in the South Asian countries, apart from specific historic and social factors in each country, can be greatly attributed to Pakistan’s religious parties and its strategic anti-India policies. After Afghanistan, Bangladesh is one of the larger Muslim counties upon which the threat of Islamic militancy looms large. The involvement of Pakistani agencies can also be clearly discerned in the growth of militancy in India, Nepal and Sri Lanka