This article develops a theory about the narrative foundations of public policy. Politicians draw on specific types of narratives in order to connect the policies they are proposing, the needs of the public, and their own needs for legitimacy. In particular, politicians are drawn to policy narratives in which they themselves occupy the central and heroic character position, and where they are able to protect the scope of their jurisdictional authority. We demonstrate how this works through a historical analysis of congressional debate about the nonprofit sector in the United States. Two competing narratives framed these debates: (1) a selfless charity narrative, in which politicians try to empower heroic charity workers and philanthropists, and then stay out of the way; and (2) a masquerade narrative, in which fake charities are taking advantage of the nonprofit tax exemption, in order to pursue a variety of noncivic and dangerous activities. Members of Congress quickly adopted the masquerade narrative as the dominant framework for discussing the nonprofit sector because it provided a more powerful and flexible rhetoric for reproducing their political legitimacy. By developing innovative elaborations of the masquerade narrative (i.e., identifying new categories of “false heroes”), while remaining faithful to its underlying narrative format, politicians were able to increase the persuasive impact of their legislative agendas. We argue that the narrative aspects of political debate are a central component of the policy-making process because they link cultural and political interests in a way that involves the mastery of cultural structure as well as the creativity of cultural performance.