At a time of mounting concern about how traditional welfare states will react to globalization, there has been increasing interest in specifying how global economic forces affect welfare policies in industrialized states. Building on theories from the political economy and comparative institutional literatures, we analyze the influence of an important aspect of globalization—the flow of immigration. Focusing on states in the European Union, we present a theoretical model that illustrates the interactive relationships between immigration, EU labor market integration, and domestic institutions. Our findings highlight how immigration in conjunction with domestic political institutions affects unemployment provisions, while labor market integrative forces remain in the background. The story of immigration and unemployment compensation in the EU is less about the opening of borders and the market forces of integration and more about the domestic political pressures.