Since they both arose in the late 1950's and early 1960's, Libertarianism and Objectivism have had a close yet sometimes contentious relationship, with Objectivism being a significant influence upon libertarian political philosophies.

Many libertarians derive their libertarianism from distinct moral beliefs that are shared with, and often derived from, Objectivism. Specifically, the idea of life, liberty, and property being inalienable rights (originating in the philosophy of John Locke) is shared by both, as is the "non-aggression principle", which states that no one may initiate the use of physical force against others. Libertarians who derive their beliefs from economic reasoning also acknowledge the insights of Objectivism when appropriate, even when not deriving their libertarianism moralistically from it. Many influential figures in the libertarian movement, such as L. Neil Smith, acknowledge a debt to Objectivism. In addition, the fiction of Ayn Rand is popular among libertarians, even those who do not share Rand's philosophical beliefs.

When she was alive, Ayn Rand was openly hostile to the term "libertarian" and to the libertarian movement. Rand said of libertarians that "They are not defenders of capitalism. They’re a group of publicity seekers... most of them are my enemies... I’ve read nothing by a Libertarian (when I read them, in the early years) that wasn’t my ideas badly mishandled—i.e., had the teeth pulled out of them—with no credit given."[1]

The source of the dispute, according to Rand, is that libertarians would "like to have an amoral political program." Rand believed that the only consistent defense of capitalism could come from her philosophy, which built its political and ethical foundation on her view of metaphysics and epistemology. Rand saw libertarianism as too shallow to be effective, and believed that libertarians could do more harm to capitalism than its opponents.

Another bone of contention was the anarcho-capitalist bent of many early libertarians that Rand came into contact with, such as Murray Rothbard. Objectivism is strongly on the minarchist side of libertarianism, and Rand was a strong critic of anarchy, considering it as dangerous as extreme statism.

Rothbard (whose brief personal friendship with Rand ended in acrimony), in turn, wrote The Sociology of the Ayn Rand Cult, which concluded:

The major lesson of the history of the movement to libertarians is that It Can Happen Here, that libertarians, despite explicit devotion to reason and individuality, are not exempt from the mystical and totalitarian cultism that pervades other ideological as well as religious movements. Hopefully, libertarians, once bitten by the virus, may now prove immune.[2]

According to Nathaniel Branden, one of Ayn Rand's closest associates during much of her life, "She did not realize that the majority of people who called themselves "libertarians" were advocates not of anarchism but of constitutionally limited government (in essence, the Objectivist model)... In any event, today libertarianism is part of our language and is commonly understood to mean the advocacy of minimal government. Ayn Rand is commonly referred to as "a libertarian philosopher." Folks, we are all libertarians now. Might as well get used to it."[3]

Since the death of Ayn Rand, Leonard Peikoff, the Ayn Rand Institute, and the Objectivists who are influenced by them have continued Rand's acrimony toward the libertarian movement. However, other Objectivists and admirers of Rand had since joined the libertarian movement, and David Kelley's Objectivist Center has focused on building a closer relationship between Objectivism and the libertarian movement. Branden approves of Kelley's efforts, quoting from this Talmudic passage: "A hero is one who knows how to make a friend out of an enemy."