The crime that still haunts Don Browne took place on a cold, damp evening in February 1985 outside a housing development in a working-class neighborhood of Derry, Northern Ireland. That night, Browne says, he handed over a cache of weapons to fellow members of a Catholic paramilitary unit. The gunmen whom he had supplied pulled up to a row house where Douglas McElhinney, 42, a former officer in the Ulster Defense Regiment—the Northern Ireland branch of the British Army—was visiting a friend. As McElhinney was about to drive away, a member of the hit squad killed him with a sawed-off shotgun.

For his role in the murder, Browne, now 49, was sentenced to life. At the time a member of the Irish National Liberation Army (INLA), a breakaway faction of the Irish Republican Army (IRA), he was sent to Long Kesh Prison outside Belfast. He spent more than 13 years behind bars. Then, in September 1998, he was released under a settlement signed by Britain and the Republic of Ireland: the Good Friday, or Belfast, Agreement, which had been endorsed by Sinn Féin—the IRA's political wing—and most other Catholic and Protestant parties in Northern Ireland. At first, Browne had difficulties adjusting to the outside world. He was terrified to cross streets because he couldn't judge the speed of cars. He had also lost social skills. "If I asked a woman out for a cup of coffee, was I being a pervert?" he recalls wondering.

Two things helped ease his way into postwar society. Browne had studied meditation with a dozen "rough-and-tough provos [provisional IRA members]" in Long Kesh, and after his release, he began teaching yoga classes in Derry. An initiative called the Sustainable Peace Network proved even more beneficial. Today, Browne brings together former combatants from both sides—and sometimes their victims' families—to share experiences and describe the difficulties of adjusting to life in a quiescent Northern Ireland. "In the early days, some combatants—both republicans and Loyalists—were threatened to not take part [in the reconciliation efforts]," Browne tells me over coffee in his yoga studio outside Derry's 400-year-old city walls. But the threats have subsided. "To hear what your [former] enemies experienced is life-changing," he says.

The Troubles, as Northern Ireland's sectarian strife came to be known, erupted nearly 40 years ago, when Catholic Irish nationalists, favoring unification with the Irish Republic to the south, began a violent campaign against Britain and the Loyalist Protestant paramilitaries who supported continued British rule. Over some 30 years, more than 3,500 people were killed—soldiers, suspected informers, militia members and civilians caught in bombings and crossfire—and thousands more were injured, some maimed for life. Residents of Belfast and Derry were sealed off in a patchwork of segregated neighborhoods divided by barbed wire and patrolled by masked guerrillas. As a 17-year-old Catholic teenager fresh from the countryside in 1972, Aidan Short and a friend wandered unwittingly onto a Protestant-controlled road in Belfast. The two were seized by Ulster Volunteer Force (UVF) gunmen, a Loyalist paramilitary group. Accused of being members of the IRA, the teens were shot at point-blank range, leaving Short paralyzed and his friend—shot through the face—still traumatized 35 years later. "A small mistake could ruin your life," Short told me.

Ten years ago, the Good Friday Agreement officially put an end to the Troubles. The deal, brokered by President Bill Clinton, Senator George Mitchell, British Prime Minister Tony Blair and Republic of Ireland Taoiseach (equivalent to prime minister) Bertie Ahern, represented a historic compromise. It created a semiautonomous government body comprising both Catholics and Protestants, and called for disarmament of paramilitary groups, release of jailed combatants and reorganization of the police force (at the time, 93 percent Protestant). The agreement also stipulated that Northern Ireland would remain part of Britain until a majority of its citizens voted otherwise. Another breakthrough occurred in May 2007: Martin McGuinness, a leader of Sinn Féin (headed by Gerry Adams) and former commander of the IRA in Derry, formed a coalition government with Ian Paisley, a firebrand Protestant minister and chairman of the hardline Democratic Unionist Party until June 2008. (The DUP had refused to sign the 1998 agreement.) "I still meet people who say they [had] to pinch themselves at the sight of us together," McGuinness told me during an interview at Stormont Castle, a Gothic-styled landmark that serves as the seat of government.

Not everyone welcomes the peace. Shunning the tenth-anniversary celebrations last April, Jim Allister, a former DUP leader, declared that the Good Friday Agreement "rewarded 30 years of terrorism in Northern Ireland by undermining both justice and democracy." Surprisingly, the construction of so-called peace walls—barriers of steel, concrete and barbed wire erected between Protestant and Catholic neighborhoods—has continued since the agreement. Most of the walls, which range from a few hundred yards to three miles in length, stretch across working-class neighborhoods of Belfast, where Protestants and Catholics live hard by one another and sectarian animosities haven't died down. Some IRA splinter groups are still planting explosives and, rarely, executing enemies.

During the Troubles, IRA and Loyalist paramilitaries functioned as neighborhood security forces, often keeping the two sides at bay. Now those internal controls have disappeared, and communities have requested that the municipal council construct barriers to protect residents. At a business conference in Belfast last May, New York City Mayor Michael Bloomberg commended the progress made so far. But he said that the peace walls would have to be dismantled before U.S. companies step up investment. Paisley responded that only local communities could decide when the time is right. The peace process "is not like going into a darkened room and turning on a light switch," says McGuinness. The IRA, the armed wing of McGuinness' own Sinn Féin, waited seven years before handing over its weapons. "It's going to take time."

Even in its embryonic stages, though, the Northern Ireland agreement is increasingly regarded as a model of conflict resolution. Politicians from Israel and Palestine to Sri Lanka and Iraq have studied the accord as a way to move a recalcitrant, even calcified, peace process forward. McGuinness recently traveled to Helsinki to mediate between Iraqi Sunnis and Shiites. And Morgan Tsvangirai, Zimbabwe's opposition leader, praised Northern Ireland's "new beginnings" when he visited Belfast last spring to address a gathering of liberal parties from around the world.

As political stability strengthened, Northern Ireland began looking toward the Republic of Ireland to learn how to transform itself into an economic powerhouse. In the Republic, an educated population, skilled labor force, generous European Union investment, strong leadership and development of a high-tech sector created unprecedented prosperity. Within a decade—from the mid-1990s on—the "Celtic Tiger" turned itself into Europe's second-wealthiest nation (behind Luxembourg).

Today, however, the global economic crisis has hit the Republic's economy hard and slowed development momentum in Northern Ireland. Even before the worldwide financial meltdown occurred, Northern Ireland faced serious obstacles—reluctance among U.S. venture capitalists to invest, lingering sectarianism, and poor education, health and employment prospects in sections of Belfast and Derry. Yet McGuinness and other leaders are optimistic that investors will be attracted once the world economy improves and confidence builds.

No town or city better illustrates how far Northern Ireland has come and how far it has to go than its capital, Belfast, which straddles the Lagan River in County Antrim. Investment capital, much of it from England, has poured into the city since the coming of peace. The city center, once deserted after dark, is now a jewel of restored Victorian architecture and trendy boutiques. A new riverside promenade winds past a renovation project that is transforming the moribund shipyards, at one time Belfast's largest employer, into a revitalized district, the Titanic Quarter, named for the doomed luxury liner that was built here in 1909-12. The Lagan, once a neglected, smelly and polluted estuary, has been dramatically rehabilitated; an underwater aeration system has vastly improved water quality.

"People in Belfast are defining themselves less and less by religion," entrepreneur Bill Wolsey told me over a pint of Guinness at his elegant Merchant Hotel, a restored 1860 Italianate building in the historic Cathedral Quarter. "Until the Merchant opened, the most famous hotel in Belfast was the Europa—which was bombed by the IRA dozens of times," Wolsey says. "We needed a hotel that the people of Belfast would be proud of—something architecturally significant. And it's leading a revival of the whole district." In the lively neighborhood surrounding the Merchant, traditional Irish music can be heard regularly in pubs.

But half a mile away, one enters a different world. On Shankill Road, a Loyalist stronghold in west Belfast, youths loiter on litter-strewn sidewalks in front of fish-and-chips shops and liquor stores. Brightly painted murals juxtapose images of the late Queen Mother and the Ulster Freedom Fighters, a notorious Loyalist paramilitary group. Other wall paintings celebrate the Battle of the Boyne, near Belfast, the 1690 victory of Protestant King William III over Catholic King James II, the deposed monarch attempting to regain the British throne. (William's victory consolidated British rule over the whole of Ireland. British hegemony began to unravel with the 1916 Irish uprising; five years later, the Anglo-Irish Treaty created the Irish Free State out of 26 southern counties. Six northern counties, where Protestants formed the majority of the population, remained part of Britain.) Another half mile away, in the Catholic Ardoyne neighborhood, equally lurid murals, of IRA hunger strikers, loom over brick row houses where the armed struggle received wide support.

In August 2001, the Rev. Aidan Troy arrived as pastor of Holy Cross Parish on Crumlin Road, a dividing line between Catholic and Protestant neighborhoods. Earlier, in June, a sectarian dispute had escalated into heckling and bottle-throwing by Protestants who tried to stop Catholic children from reaching their school. When the new school year began in the fall, Father Troy attracted international media attention when he escorted frightened children through the gantlet every school morning for three months.

The area remains tense today. Troy leads me to the rear of the church, its gray stone walls splattered with paint tossed by Protestants. "Even last week they threw [a paint bomb] in," he says, indicating a fresh yellow stain. Peace has brought other difficulties, Troy tells me: the suicide rate among Belfast's youth has risen sharply since the Troubles ended, largely because, the priest believes, the sense of camaraderie and shared struggle provided by the paramilitary groups has been replaced by ennui and despair. "So many young people get into drinking and drugs early on," Troy says. And lingering sectarian tensions discourage business development. In 2003, Dunne's Stores, a British chain, opened a large department store on Crumlin Road. The store recruited Catholic and Protestant employees in equal numbers, but hostile exchanges involving both shoppers and staffers escalated. Because the store's delivery entrances faced the Catholic Ardoyne neighborhood rather than neutral ground, Dunne's was soon deemed a "Catholic" store and deserted by Protestants. Last May, Dunne's shut its doors.

Troy believes that it will take decades for the hatred to end. Ironically, he says, Northern Ireland's best hope lies with the very men who once incited violence. "I don't justify one drop of blood, but I do believe that sometimes the only ones who can [make peace] are the perpetrators," Troy tells me. "The fact we haven't had a hundred deaths since this time last year can only be good." Peace, he says, "is a very delicate plant." Now, he adds, "there's a commitment" from both sides to nurture it.

The next morning, I drive out from Belfast to the north coast of County Antrim, where something of a tourist boom is underway. Green meadows, dotted by yellow wildflowers, stretch along cliffs pounded by the Irish Sea. I follow signs for the Giant's Causeway, a scenic shoreline famed for its 40,000 basalt columns rising from the sea—the result of an ancient volcanic eruption. Some of the structures tower four stories above the water; others barely break the surface to create a natural walkway—remnants, according to Irish myth, of a path laid to Scotland by the Irish giant Finn McCool.

Two miles inland lies the quaint village of Bushmills, its narrow main street lined with old stone taverns and country inns. I pull into the packed parking lot of Old Bushmills Distillery, makers of the popular Irish whiskey. The distillery received its first license from King James I in 1608. In 2005, Diageo, a British spirits manufacturer, purchased the label, tripled production and renovated the facilities: 120,000 visitors or so tour each year. Darryl McNally, the manager, leads me down to a storage cellar, a vast, cool room filled with 8,000 oak bourbon casks imported from Louisville, Kentucky, in which the malt whiskey will be aged for a minimum of five years. In the wood-paneled tasting room, four different Bushmills single malts have been laid out in delicate glasses. I take a few sips of Bushmills' finest, the distinctly smooth, 21-year-old "Rare Beast."

Later, from the ruined stone ramparts of Dunluce Castle, dating to the 14th century, I gaze across the Irish Sea's Northern Channel toward the southwest coast of Scotland, some 20 miles away. Stone Age settlers crossed the straits here, then Vikings, and later, Scots, who migrated in the early 17th century—part of the still bitterly resented Protestant colonization of Catholic Ireland under James I.

Farther down the coast lies Derry, a picturesque city on the River Foyle, freighted with historical significance for both Catholics and Protestants. I cross the murky river by a modern steel suspension bridge. A steep hill is dominated by the city's 400-year-old stone ramparts, one of the oldest continuous city walls in Europe. Inside the wall stands an imposing stone building—headquarters of the Apprentice Boys of Derry, a Loyalist group. William Moore, its general secretary, leads me upstairs to a second-floor museum, where multimedia exhibits recount the establishment in 1613 of an English Protestant colony in Derry—previously a Catholic settlement. The newcomers built a walled town on the hill and renamed it Londonderry. In 1689, James II, a Catholic, set out from France to capture the city, a key offensive in his plan to cross the Irish Sea and retake the British throne. During the 105-day siege that followed, Moore tells me, "inhabitants were reduced to eating dogs and cats, and 10,000 of 30,000 Protestants died of starvation and disease." William III's forces broke the cordon and sent James back to France in defeat. Since 1714, the Apprentice Boys have commemorated the siege with a procession on the ramparts. (The group takes its name from 13 young apprentices who shut the gates and pulled up the drawbridges before James' forces arrived.) Catholics have long viewed the march as a provocation. "It's commemorating 10,000 deaths," Moore insists defensively.

Catholics have their own deaths to mark. On January 30, 1972—Bloody Sunday—British paratroopers firing rifles here killed 14 protesters demonstrating against the British practice of interning paramilitary suspects without trial. (A British government-funded tribunal has been investigating the incident for a decade.) The massacre is seared into the consciousness of every Catholic in Northern Ireland—and is one reason why the sectarian split ran so deep here during the Troubles. Protestants referred to the city as "Londonderry," while Catholics called it "Derry." (The bite is going out of this dispute, although the official name remains Londonderry.) Kathleen Gormley, principal of St. Cecilia's College, remembers being upbraided by British troops whenever she used its Catholic name. "We're obsessed with history here," Gormley tells me.

Yet times are changing, she says. Gormley believes that Derry has made more progress in defusing sectarian animosity than Belfast, which she visits often. "People in Belfast are more entrenched in their mind-set," she tells me. "There's a lot more cross-community involvement here."

In contrast to Belfast, where certain Loyalist parades continue to provoke disruptions, in Derry tensions have eased. The Protestant Apprentice Boys have even reached out to the Bogside Residents, a group representing Derry's Catholics. "We recognize that the city is 80 percent Catholic," says Moore. "Without their understanding, we knew we'd [keep having] major difficulties." The Boys even opened its building to Catholics, inviting them to tour the siege museum. "It helped us to relate to them as human beings, to understand the history from their perspective," Gormley told me.

But old habits die hard. One morning, I drive to south Armagh, a region of rolling green hills, pristine lakes and bucolic villages along the border with the Republic of Ireland. It's a land of ancient Irish myths, and stony, unforgiving soil that historically kept colonists away. During the Troubles, this was an IRA stronghold, where highly trained local cells carried out relentless bombings and ambushes of British troops. "We were first seen as ‘stupid ignorant paddies,' and they were ‘Green Berets.' Then they started getting killed on a regular basis," says Jim McAllister, a 65-year-old former Sinn Féin councilman. We had met at his run-down housing development in the hamlet of Cullyhanna. Though his midsection is thickening and his gray hair has thinned, McAllister is said to have been among the most powerful Sinn Féin men in south Armagh. By the late 1970s, he says in a heavy brogue, "the IRA controlled the ground here." British forces retreated to fortified camps and moved around only by helicopter; ubiquitous posters on telephone poles in those days depicted a silhouetted IRA gunman peering down a sight and the slogan "Sniper at Work."

McAllister says that the IRA's paramilitaries have evolved into a powerful local mafia that controls the smuggling of diesel fuel and cigarettes from across the border—and tolerates no competition. Because of higher duty taxes, diesel in Britain is more expensive than in the Republic of Ireland; the open border here makes it absurdly easy to bring cheaper fuel across illegally. (Smugglers also transport low-priced tractor fuel into Northern Ireland, where it's chemically treated for use in cars and trucks.) "When the war finished, a lot of IRA men said, ‘This is over, forget about it.' But a small number are still at it," McAllister says.

We drive down country lanes to the cottage of Stephen Quinn, whose son, Paul, fell out with IRA members in Cullyhanna in 2007—some say because he was smuggling fuel without their permission. (McAllister says that while Paul did a little smuggling, it was more his attitude toward IRA locals that got him into trouble.) "My son had no respect for them. He got into fistfights with them," Stephen Quinn, a retired trucker, tells me. One evening in October, Paul and a friend were lured to a farmhouse across the border, where Paul was beaten to death with iron bars and clubs with metal spikes. (His companion, also beaten, survived.) "We're the bosses around here," the survivor reported one of the men as saying.

In the aftermath of the murder, hundreds of local people, including McAllister, braved threats from local "provos" to protest. As we drive around the tidy central square in Crossmaglen, south Armagh's largest village, he now points out a placard bearing a photograph of Paul Quinn over the words: "Is This the Peace We Signed Up For? Your Community Is in the Grip of Murderers." "It would have been unheard of to put up a poster like that two years ago," McAllister says. "By murdering Paul Quinn, the IRA has changed things big-time." McAllister says Quinn's murderers—still unidentified—will be brought to justice.

Four separate criminal tribunals are currently underway in Northern Ireland, examining past atrocities including Bloody Sunday. In addition, families of victims of the August 15, 1998, Omagh bombing, in which 29 people died, are pursuing a landmark civil suit against members of the "real" IRA, a dissident splinter group of the IRA. (The group "apologized" for the killings several days later.) In 2007 Northern Ireland also established the Consultative Group on the Past, to explore ways of illuminating the truth about the thousands of deaths. Chaired by a former Anglican archbishop, Lord Robin Eames, and a former Catholic priest, Denis Bradley, the group issued its recommendations in late January. Among its proposals were setting up a South African-style Truth and Reconciliation Commission and making payments to victims on both sides.

But like everything else in this country, the issue is fraught. Loyalists contend that such a commission would let the IRA off too easy. Catholics, meanwhile, want all murders, including those of republican fighters by British soldiers, to be investigated. "The definition of what a victim is remains one of the most contentious issues in Northern Ireland," Bradley told me. "We have moved past armed conflict and civil unrest. But we haven't moved past the political issues on which these things had their basis."

Even as the dispute continues, individuals are making their own attempts to confront the past. Back at the yoga studio in Derry, Don Browne, the former member of a hit squad, tells me that he wouldn't be opposed to a private meeting with the family of McElhinney, the former UDR man murdered 24 years ago. He admits he is anxious about the prospect: "I'm worried about retraumatizing the family. I don't know if they've found closure," he says. A decade after the end of the Troubles, it is an issue with which all of Northern Ireland seems to be grappling.

Writer Joshua Hammer lives in Berlin.
Photographer Andrew McConnell is based in Nairobi.