This article argues that under certain conditions the United States can play an important role in peacefully resolving a conflict involving an ally and a nationalist terrorist organization (NTO) by engaging the NTO. An American policy of engagement can bring both parties to the table by convincing them that they are trapped in a mutually hurting stalemate and that negotiations offer the only way out of this situation. In addition, engagement provides the U.S. with significant leverage over both of the disputants, enabling it to push both parties to make the concessions necessary to realize a settlement. However, engagement can only have these effects if the U.S. bias towards its ally is tempered and if its policy is serious, sustained, and conditional. For these conditions to hold, there must be significant domestic support within the United States for a policy of engagement. These arguments are illustrated with case studies of the U.S. engagement of Sinn Fein between 1994 and 2005 and the U.S. dialogue with the Palestine Liberation Organization between 1988 and 1990.