This paper describes negotiations between the City of Fredericksburg, VA, and the County of Spotsylvania over a legal initiative by the county to prevent annexation, and over the proposed annexation itself. The territory under dispute included six square miles of county land, and included several shopping centers, the only regional mall, an industrial park, and several thousand county residents. The mediation process gave the city and county a formal means of pursuing structured negotiations toward dispute settlement. The opportunity to negotiate their own settlement afforded the parties two benefits unavailable to litigating disputants. First, the local elected officials and managers most aware of the competing values at stake and the facts of the case were able to maintain a primary decisionmaking role in the case. Second, by maintaining an open negotiating process instead of relying on formal positions recorded in briefs for litigation, the parties were able to look beyond the immediate causes of the dispute to fashion a settlement encompassing wider, interjurisdictional concerns. In general, public officials who have used third party mediation view it favorably, for mediation enables them to resolve political and technical issues in a dispute that has reached an impasse. Mediation also complements more traditional dispute resolution models. The evidence indicates that mediation can improve the quality of intergovernmental decisionmaking. Three notes are included.