This paper presents evidence supporting the idea that what Ruggie called embedded liberalism plays an important role in producing peaceful relations between states. While empirical findings have shown democracy to be an immensely robust factor in reducing dyadic conflict, the role of liberalism is still debated. Our study reexamines the relationship between liberalism and disputes by distinguishing between ?classical? liberalism, often measured as trade interdependence, and ?embedded? liberalism, which considers the influence of state-society relations on international cooperation. We construct a measure of embedded liberal democracy and test its relationship to dispute onsets for the set of politically relevant dyads during 1950-1992. We use logistic regression, apply corrections for serial correlation and cross-sectional interdependence, and employ control variables for democracy, power, contiguity, wealth, and other potentially confounding factors. Our results show a strong, significant, and robust reduction in dispute onsets as embedded liberal democracy within a dyad increases. Preliminary data show that this effect has weakened since 1990, , indicating that system structure and perhaps hegemony might be a confounding factor. [ABSTRACT FROM AUTHOR]