Short-range missiles in Third World arsenals pose a serious threat to forward employed U.S. and allied military forces. The acquisition of longer- range missiles has the potential to extend that threat to the population and territory of the United States and its allies. While NATO member states have agreed to develop Theater Missile Defense (TMD) systems to support forward- deployed troops, they continue to dispute which TMD systems ought to be developed and whether territorial or population defenses ought to be built. In this long-standing dispute, the United States has often found itself at odds with its European allies. This thesis argues that ballistic missile defense remains a potential source of friction between the United States and its European allies, but for substantially different reasons than in the Cold War era. The strategic and political differences which alienated allies during the Cold War have been replaced by economic considerations and the inability to develop a unified BMD strategy. These factors continue to make BMD a divisive issue. To prevent the erosion of Alliance relations, the United States must show greater sensitivity to the interests of its European allies, who in turn must exhibit a greater commitment to NATO goals.