This essay details the urban consequences of the Al Aqsa Intifadah and the separation barrier project on Jerusalem. In West Jerusalem, the onset of terror, and specifically a wave of suicide bombings, hastened the city’s decentralization. Rapid decline of the economy and the disappearance of tourism further battered the city’s vitality. Israel’s ncreased barriering of the city, culminating in the separation barrier project, was a major low for the city’s Arab inhabitants, and the urban fabric of East Jerusalem. Neighborhoods inside and outside the barrier were divided, with massive effects on daily life, work opportunities, property values, and relocation patterns. The paper argues that without a strategic package of urban recovery measures, Jerusalem is in danger of becoming locked in a spiral of decline.