Liberal institutionalism (or institutional liberalism or neoliberalism) is a theory of international relations that holds that international cooperation between states is feasible and sustainable, and that such cooperation can reduce conflict and competition. Neoliberalism is a revised version of liberalism. Alongside neorealism, liberal institutionalism is one of the two most influential contemporary approaches to international relations.

In contrast to neorealist scholarship (which is skeptical of prospects for sustainable cooperation), liberal institutionalism argues that cooperation is feasible and sustainable. Liberal institutionalists highlight the role of international institutions and regimes in facilitating cooperation between states. Robert Keohane's 1984 book After Hegemony used insights from the new institutional economics to argue that the international system could remain stable in the absence of a hegemon, thus rebutting hegemonic stability theory.

Keohane showed that international cooperation could be sustained through repeated interactions, transparency, and monitoring. According to Keohane and other liberal institutionalists, institutions facilitate cooperation by:

Some call the school of thought rational functionalism instead of liberal institutionalism. Liberal institutionalism is also close to—but not synonymous with—regime theory and neoliberalism. Robert Keohane, a political scientist largely responsible for the development of liberal institutionalism, considers his ideas part of institutionalism or rational institutionalism, even though those schools disagree with him on certain points. Keohane dislikes using the adjectives "liberal" or "neoliberal" to describe his work because he also draws from realism, a school of thought that is often contrasted with liberalism. Other major influences are the hegemonic stability theory of Stephen Krasner and the work of Charles P. Kindleberger, among others.

Liberal institutionalism differs from other common international relations theories like realism in the fact that it does not ignore internal politics. Furthermore, institutional liberalism follows the idea that democracy and capitalism create systems which not only maintain peace but also create beneficial economic opportunities for those involved. Liberal institutionalists believe that democracies naturally lead to peace because the many govern and not the few, and therefore those who decide to go to war will be the many that serve. This is in stark contrast to monarchies and dictatorships that are more warlike due to the fact that the few that do not serve will go to war. Beyond that liberal institutionalists defend capitalism on an international scale because they believe that if two nations are friendly, democratic, and capitalist the two nations will inevitably negotiate mutually beneficial trade deals.

According to liberal institutionalists, institutions facilitate cooperation by:

Critics of liberal institutionalism argue that institutions do not overcome power politics; rather, institutions reflect power politics. Realist Joseph Grieco argues that liberal institutionalist analyses omit that states pursue relative gains (rather than absolute gains), and that institutionalist analyses that focus on the issue of "cheating" ignore that the relative gains problem is key to why realists believe international cooperation fails. Critics also argue that it is unclear whether institutions have an independent effect on cooperation or whether they reflect that the members are already willing to cooperate and comply. Other critics argue that liberal institutionalist underestimate the enforcement powers of institutions: institutions are often designed to be weak to attract more members, and they tend to be particularly weak on issues related to security rather than economy.

Using logics from historical institutionalism, John Ikenberry argues that institutions may be highly durable because