Narcoterrorism, in its original context, is understood to refer to the attempts of narcotics traffickers to influence the policies of a government or a society through violence and intimidation, and to hinder the enforcement of anti-drug laws by the systematic threat or use of such violence. As with most definitions of terrorism, it typically only refers to non-state actors.

Pablo Escobar's violence in his dealings with the Colombian government is probably one of the most known and best documented examples of narcoterrorism. The term itself was coined by former President Fernando Belaúnde Terry of Peru in 1983 when describing terrorist attacks against his nation's anti-narcotics police. The term has become a subject of controversy, largely due to its use in discussing violent opposition to the US government's War on Drugs.

The term is being increasingly used for terrorist organizations that engage in drug trafficking activity to fund their operations and gain recruits and expertise. Such organizations include FARC, ELN, AUC in Colombia, PCP-SL in Peru, Hezbollah, and the Taliban.

A 2013 Congressional Research Service report noted that in 2003, the Drug Enforcement Administration (DEA) reported that 14 of 36 (39%) of the groups designated by the U.S. as foreign terrorist organizations "were involved 'to some degree' in illicit narcotics activity" while in fiscal year 2010, the U.S. Department of Justice (DOJ) "reported that 29 of the top 63 international drug syndicates, identified as such on the consolidated priority organization target (CPOT) list, were associated with terrorists."

In 2000, the U.S. enacted, continued under the Bush administration, Plan Colombia, intending to eradicate drug crops and to act against drug lords accused of engaging in narcoterrorism, including among them the leaders of the Marxist FARC and the AUC paramilitary forces. The U.S. government is funding large-scale drug eradication campaigns and supporting Colombian military operations, seeking the extradition of commanders.

Although al-Qaeda is often said to finance its activities through drug trafficking, the 9/11 Commission Report notes that "while the drug trade was a source of income for the Taliban, it did not serve the same purpose for al Qaeda, and there is no reliable evidence that bin Laden was involved in or made his money through drug trafficking." The organization gains most of its finances through donations, particularly those by "wealthy Saudi individuals".

Critics of the prohibition of drugs say that prohibition itself funds terrorism by indirectly creating a black market for banned substances from which criminal organizations profit.

In 2025, by executive order, the United States expanded its approach in its counter drug campaign to designate foreign drug cartels as foreign terrorist organizations. This gave the United States military broad authority to employ military force against drug cartels and to target their leaders through direct military action.