After several prolonged conflicts, civil wars and a two-year political transition, Liberia is gradually emerging as a peaceful and stable democracy. Rightly so, much optimism and expectation has surrounded Madam Ellen Johnson-Sirleaf recent inauguration as Liberia’s and Africa’s first democratically elected female president. However, Liberia still faces enormous development and nation-building challenges. This paper analyzes the current security and foreign policy dilemma in Liberia, and the challenges of postwar reconstruction and state-building in the country. The paper first examines the history, political struggles and the civil wars. The paper then presents eight policy recommendations that the new government, policy-makers and Liberian people can follow in addressing Liberia’s security and foreign policy dilemma.