Despite the Kim Dae-jung government’s active pursuit of its ‘sunshine policy’, the Korean peninsula is once again caught up in a major nuclear crisis. The current crisis emerged when Pyongyang revealed that it was conducting a uranium-enriched nuclear weapons program in violation of the Geneva Agreed Framework of 1994. The new development suggests the Pyongyang regime’s continuing reliance on a pattern of raising stakes for political and economic ‘rewards’. For Kim Jong Il, there would appear to be no reason to act otherwise in the light of the previous successes of his brinkmanship. Since the regime believes that there is a positive causal relationship between the nuclear weapons program and its own survival, it may be difficult to engage Pyongyang in a genuine dialogue, let alone persuade it to dismantle its WMD programs. If a peaceful resolution is to have a chance, a consensus must emerge between the governments of the USA, South Korea, Japan, China, and Russia, signaling to Pyongyang that the only way to ensure its survival is not to threaten for rewards, but in fact to earn them. Meanwhile, every effort must be made to achieve a negotiated settlement. This article chronicles the trends of crisis on the Korean peninsula and offers a negotiated-settlement option as the most viable policy option for dealing with the North Korean nuclear challenge, especially in the apparent absence of the traditional US–South Korea alliance cohesion.