In this paper, we outline the significant progress that has been made by researchers using contact theory to combat the worst effects of prejudice and group based feelings amongst young people. We argue that the emergence of segregated areas in western societies, with members of religious or ethnic groups living largely in isolation from other groups, provides a breeding ground for group discontent and terrorist recruitment. We outline research suggesting that the group perceptions which underpin extreme group attitudes and terrorism in young people can be changed through contact with other group members. We discuss new evidence suggesting that young people's attitudes in segregated environments can be moderated through intergroup contacts. Using Moghaddam's conceptual exploration of steps toward terrorism as a framework, we discuss how cross group contacts may help to counter terrorism at different levels in his hypothetical staircase. Intergroup contacts we suggest can play an important role in both combating categorical “them versus us” thinking and when combined with new technology may help interrupt the circle of isolation that is central to terrorist recruitment via the internet.