This study suggests that terrorism concerns can hinder the effect of prejudice reduction interventions based on education and outgroup knowledge. There is accordance in the literature that individuals who possess more knowledge about Muslim people and Islam are less likely to have anti-Muslim prejudice. We conducted secondary analyses of data from a representative sample of Australians (N = 1,267), and we found that terrorism concerns moderate the relationship between anti-Muslim prejudice and knowledge of Islam, wherein individuals with higher levels of terrorism concern have high anti-Muslim attitudes regardless of their levels of knowledge. In an experimental study manipulating terrorism concerns, a national sample of 502 Australians was randomly allocated to watch a news video about ISIS or a video portraying Muslims positively. Individuals who watched the ISIS video had significantly higher anti-Muslim attitudes and were significantly more likely to retain negatively framed information about Muslims than those who watched the positive video. Please refer to the Supplementary Material section to find this article's Community and Social Impact Statement.