The passage of a restrictive immigration law in Arizona in 2010 rekindled an old debate in the United States on immigration policy and the role of federalism. Despite periodic constitutional controversies, scholars of federalism and U.S. state politics have not adequately explained variation in state-level policy making on immigration. The authors explore pressures leading to state immigration policy innovation and adoption in the United States. The article evaluates factors leading to the introduction and adoption of two types of policies: those dictating the cultural and economic incorporation of immigrants and those attempting to control their flow and settlement. Factors such as fiscal federalism, ethnic contact, and ethnic threat generate incentives for states to pass such laws. The authors compiled a comprehensive data set of state immigration laws from the past decade to explain how factors commonly associated with national immigration policy development—economic conditions, rates of immigration, demographics, party control, and political institutions—influence state-level immigration policy activity.