Plagued by diverging security interests, the United States and Iran have been unable to formally reestablish diplomatic relations since the Islamic Revolution of 1979. Since 1989, the political environment in Iran underwent drastic changes with the passing of Ayatollah Khomeini. For the next sixteen years Iranian presidents attempted to normalize relations with the U.S. through various political, economic and social initiatives. It appeared as though the hostile relationship between the two countries was slowly becoming friendly. With the emergence of controversial populist president, Mahmoud Ahmadinejad, the years of diplomatic progress between the U.S. and Iran were quickly reversed. In this comprehensive study of U.S.-Iranian relations, the various reasons behind the current diplomatic stalemate between the two countries will be thoroughly explored using the Graeme Davies’s interpretation of the Diversionary Theory of War. The study covers the length of time starting from 1989 and concludes with an overview of U.S.-Iranian relations in 2012. Unlike previous works on this subject matter, the study at hand is not a mere historiography of U.S-Iranian relations. On the contrary, this study provides a qualitative analysis of domestic factors in both countries that strongly influence their foreign policy decisions. Thus, the purpose of this study is to explain the reasons behind Iranian rapprochement efforts in a structured analytical manner.