In this work, It will first develop a brief history of El Salvador. Next, It will describe thepolitical situation in El Salvador and its relation to American political assistance during the1980s war against the Marxist rebels. In the third section, It analyzes El Salvador's economyand American economic aid and show how it supported the counterinsurgency. It will thendiscuss the military situation in El Salvador and American military support in defeating theMarxist rebels. It will offer some concluding remarks showing how the Reagan policy helped toform a successful outcome to the war against the insurgents. Finally, It analyzes the lessonsfrom the war in El Salvador and apply them to today's war on terrorism.