This article examines the United States-Canadian defense issue area from a transnational and transgovernmental perspective, and attempts to develop conceptually the transgovernmental dimension through empirical application. The first part delineates those factors that encourage transnational and transgovernmental activity in the defense issue area. The second part considers pure intergovernmental transactions, referring to United States-Canadian dealings in which there is no transnational or transgovernmental activity. Because we know so little about how these dealings occur, this section examines pure intergovernmental transactions as a three-stage issue flow: preprocess, process, and postprocess. The third section identifies and examines the dynamics of mixed transactions, referring to intergovernmental flows having transnational or transgovernmental activity that does not essentially alter the outcomes of the flows. The fourth part identifies transformative transactions, referring to intergovernmental flows that become transnational or transgovernmental flows (or the reverse) through the involvement of new actors that significantly alter the outcomes of the flows. In summation, the fifth section considers those factors militating against transnational and transgovernmental activity in the defense area.