In recent years, extremists have increasingly turned to online spaces to distribute propaganda and as a recruitment tool. While there is a clear need for governments and social media companies to respond to these efforts, such responses also bring with them a set of ethical challenges. This paper provides an ethical analysis of key policy responses to online extremist propaganda. It identifies the ethical challenges faced by policy responses and details the ethical foundations on which such policies can potentially be justified in a modern liberal democracy. We also offer an ethical framework in which policy responses to online extremism in liberal democracies can be grounded, setting clear parameters upon which future policies can be built in a fast-changing online environment.