Since the beginning of the General Agreement on Tariffs and Trade (GATT) Uruguay Round the European Community (EC) has twice attempted to reform the Common Agricultural Policy (CAP), resulting in the February 1988 stabilizers reform package and the May 1992 MacSharry reform package. Curiously, these two attempts at reform resulted in vastly different outcomes. The 1988 reform was incremental in nature and functioned mainly as a stopgap measure. The 1992 reform, however, called for a shift from nontransparent consumer subsidies to transparent taxpayer subsidies. This shift represented a fundamental change in the philosophy underlying the CAP and laid the groundwork for an agreement in the Uruguay Round. This article examines the conditions under which this important policy shift occurred. It employs an interpretative case study method that demonstrates the empirical value of Robert Putnam's two-level game model when it is expanded to consider the simultaneous interaction of negotiations at three levels: the domestic level, the EC level, and the international level. The study concludes that the power and heterogeneity of interest groups at various levels of the game matter, that the real and perceived costs of no agreement affect the degree of substantive reform, and, finally, that a three-level interactive strategy is important in achieving an acceptable agreement at each level of the game.