Objective: To assess the nature of chronic exposure to terror and its psychological and cognitive toll on Palestinian youths, as is reflected in posttraumatic symptoms, future orientation, and attitudes toward peace. Method: In the summer of 2001, 245 Palestinian and 300 Israeli-Palestinian adolescents in the sixth to ninth grades were assessed with self-report questionnaires that measured level of exposure to terror, posttraumatic stress disorder, anxiety, depression, anger, dissociation, future orientation, and attitudes toward peace. Results: Palestinians experienced significantly more traumatic events than Israeli Palestinians; the groups did not differ, however, in their subjective perception of the threat. Palestinians also reported higher levels of posttraumatic symptoms, more pessimistic future orientation, and less favorable attitudes toward peace negotiations than the Israeli Palestinians. The groups did not differ in reported psychological symptoms related to chronic exposure to stress. In both groups, subjective perceptions of the threat were implicated in the pathogenic sequelae of exposure to terror-induced trauma. Conclusions: Chronic or repeated exposure to terror may be related to complex posttraumatic symptoms beyond those specified in DSM-IV or ICD-10, including negative personal and national future orientation. The role of subjective appraisal deserves professional attention.