This article critically explores the essence of colonial terrorism and its consequences on the indigenous people of Australia during their colonization and incorporation into the European-dominated racialized capitalist world system in the late 18th century. It uses multidimensional, comparative methods, and critical approaches to explain the dynamic interplay among social structures, human agency, and terror to explain the connection between terrorism and the emergence of the capitalist world system or globalization. Raising complex moral, intellectual, philosophical, ethical, and political questions, this article explores the essence, roles, and impacts of colonial terrorism on the indigenous Australians. First, the article provides background historical and cultural information. Second, it conceptualizes and theorizes colonial terrorism as an integral part of the capitalist world system. Specifically, it links capitalist incorporation and colonialism and various forms of violence to terrorism. Third, the article examines the structural aspects of colonial terrorism by connecting it to some specific colonial policies and practices. Finally, it identifies and explains different kinds of ideological justifications that the English colonial settlers and their descendants used in committing crimes against humanity.