This study offers a critical examination of state failure and the accompanying problems of terrorism and piracy that have plagued Somalia for almost two decades. Focusing primarily on the events that occurred within the nation following the ousting of the Union of Islamic Courts government in 2007, three research questions are probed in the study (1) What were the factors that led to the failure of the state in Somalia; (2) What events led to the rise of piracy and terrorism in Somalia; (3) What transnational efforts mounted at global and regional levels could help restore peace in Somalia, and what can be done to turn current efforts into viable solutions. It is hypothesized that the crisis in Somalia is strongly associated with the interplay of the internal structural factors of nation building, political organization and governance, and external geopolitics of power and regional rivalries. Using qualitative methods to gather data, the findings of the research reveal that the absence of a governing authority and support from various international actors has allowed terrorist organizations such as Al-Shabab and Hizbul Islam to commit atrocities against the Somali citizenry, causing deaths and massive social displacement. The lack of law and order has also allowed those engaged in acts of piracy to collect millions of dollars in ransoms with impunity, encouraging various actors from all over the globe to become involved. Additionally, the efforts to combat both terrorism and piracy have proven to be ineffective because they have primarily focused on things such as anti-piracy patrols and limited counterterrorism operations but have failed to make a concerted effort to re-establish the Somali central government. Based on the findings of the study and the realization of the danger that the failed state of Somalia poses to the international community, it is recommended that an all-inclusive national reconciliation process to establish a governing body with legitimacy throughout the entire nation be conducted. To achieve this goal, additional funding and support should be provided to regional bodies such as the African Union that have made efforts to help restore a functioning central government in the nation. If given the proper support, these entities will be able to help create an environment that will allow the people of Somalia to engage in a national reconciliation process and form a government that is able to enforce law and order in the nation.