This paper critically assesses the usefulness of the ‘new-Orientalism’ thesis in understanding the discourses around the idea of ‘terrorism’ and of ‘the terrorist’. It observes that critiques of ‘new Orientalism’ have important insights into the ways in which ‘Islam’, ‘the Muslim’ and ‘terrorist’ have come to be constructed. However, it also argues for the importance of the density of historical context and specificity of locality in understanding how these categories get formulated variously. The case of Bombay cinema is particularly instructive here. The paper argues that Bombay cinema – which has engaged with these concerns in some form since its inception, and is going ‘global’ in unprecedented ways – exemplifies both the play of these two distinct discursive tendencies and also the tensions that arise because they are not identical. Post-9/11 films like Aamir (2008) and New York (2009) manifest the discursive mechanics and the tensions that result from the play between the ‘new Orientalism’ and the local.