‘We do not negotiate with terrorists.’ For decades world leaders have asserted this principle. The historical record demonstrates otherwise, however. Contrary to their public pronouncements, statesmen have repeatedly engaged in diplomacy with terrorist organisations, and conferring with militants has sometimes led to progress, if not to peace. Or has it? The record of government officials engaging with terrorist organisations is ambiguous. Yes, inclusive dialogue has coincided with reductions in political violence in places like Colombia, Aceh, the Basque region of Spain, and Northern Ireland. But is that the only cause of these declines? What about other locations? In the Middle East, the path to peace since President Clinton’s historic meeting with Yitzhak Rabin and Yasser Arafat has been rocky, with no permanent settlement in sight. Against this unsettled background, the question arises: what does a comprehensive historical analysis of the intersection of armed extremism and statecraft reveal? This chapter’s central argument asserts that historically the interrelationship of terrorism and diplomacy has often been like entering into a labyrinth. Its conceptual apparatus consists of three supporting arguments. Some participants have accrued benefits; others have incurred costs; and they have occasionally encountered limits to the efficacy of diplomacy as a vehicle for achieving their objectives. The concepts of benefits, costs and limitations provide a useful analytical framework for assessing the experiences of protagonists at the crossroads of militancy and mediation.