The interactions between identity groups engaged in a protracted conflict lack the conditions postulated by Gordon Allport in The Nature of Prejudice (1954) as necessary if contact is to reduce intergroup prejudice. The article examines the Israeli–Palestinian conflict from this perspective. After summarizing the history of the conflict, it proposes that a long–term resolution of the conflict requires development of a transcendent identity for the two peoples that does not threaten the particularistic identity of each. The nature of the conflict, however, impedes the development of transcendent identity by creating a state of negative interdependence between the two identities such that asserting one group’s identity requires negating the identity of the other. The resulting threat to each group’s identity is further exacerbated by the fact that each side perceives the other as a source of some of its own negative identity elements, especially a view of the self as victim and as victimizer. The article concludes with a discussion of ways of overcoming the negative interdependence of the two identities by drawing on some or the positive elements in the relationship, most notably the positive interdependence between the two groups that exists in reality. Problem–solving workshops represent one setting for equal–status interactions that provide the parties the opportunity to "negotiate" their identities and to find ways of accommodating the identity of the other in their own identity.