International nongovernmental organizations (INGOs) are increasingly important players in global politics and development. However, they are undergoing significant adaptations as governments worldwide have instituted restrictions to regulate their activities. What explains the various ways in which they respond to these institutional pressures? In our study of INGO responses to a new restrictive law in China, we identify four strategic responses with varying levels of compliance: legal registration, provisional strategy, localization, and exit. The institutional pressures—strategic responses link is influenced by INGOs' adaptive capacity, which is in turn shaped by an organization's issue sensitivity, value‐add, government ties, and reputational authority. The integrated framework we develop for INGO strategic responses can shed light on state‐INGO relations in other countries, many of which are subject to increasingly stringent regulations and a closing political environment.