Rivalry is characterized by mutual mistrust, anger and fear, and becomes increasingly intractable as confrontations between rivals militarize. The empirical record confirms that rivalries account for the vast number of militarized interstate disputes and wars in the international system. Although considerable attention has been spent on the initiation, duration or termination of rivalries, to date no comprehensive theoretical framework for their persistence or failure exists. Following Fearon, a rationalist explanation of rivalry termination is developed. It is argued here that the adoption of liberal institutions helps alleviate the commitment problems arising in rivalry. Free-market reform, democratic institutions and membership in international organizations all build trust and increase defection costs among rival states, and therefore help to shorten the duration of rivalry. Using a Cox proportional hazard model and Thompson's data on rivalries, it is shown that change towards democracy, as well as the joint effect of democracy and economic development increase the likelihood of rivalry termination. Also, joint membership in international organizations with mechanisms for dispute settlement reduces the duration of rivalry.Arobustness check using Diehl and Goertz's list of rivalries produces similar results.