On 12 October 1984, the IRA detonated a bomb at the Grand Hotel, Brighton, England where the UK Prime Minister, Margaret Thatcher, and her cabinet were staying during the Conservative Party conference. As part of the hotel collapsed, five people were killed, several MPs seriously injured and Mrs Thatcher was lucky to escape alive. The IRA released a chilling statement saying "You were lucky this time. But remember, we only have to be lucky once." Shortly afterwards Ms Thatcher firmly rejected the NIF's report with a firm "No. No. No." to the three alternatives and, while this response satisfied Unionists, it was disappointing for the SDLP.

However, the UK realised that the problems in Northern Ireland were not going to stop until a settlement could be reached. So they began secret negotiations with the Irish government in early 1985 to try to find some common ground for working on. They succeeded in finding some of this common ground, and on 15 November 1985 the two governments made public what they had agreed upon: (a) the UK recognised the Irish Republic's right to make proposals concerning Northern Ireland (b) the Irish Republic recognised that a united Ireland was a long term objective and that it could only be achieved through majority consent. (c) the two governments were to set up a conference between them, to discuss issues of mutual interest and to help produce a better society in Northern Ireland. Called the Anglo-Irish Agreement it was signed in Belfast on 15 November 1985. The Irish government narrowly voted for it on the 21 November and the UK government approved it by a huge majority on 27 November. Although all the Ulster Unionist MPs were against the Agreement, this was ignored.

The reaction within the Unionist community was uproar, genuine shock and a feeling of betrayal. From their point of view, the idea that their own government could give a foreign country the right to a say in Northern Ireland affairs without consulting the Northern Ireland MPs was incredible. The Ulster Unionist leader, James Molyneaux, said that Northern Ireland was being delivered "from one nation to another". Although the SDLP supported the agreement, Sinn Fein was against it because the Irish government was recognising Northern Ireland's existance. Some individual UK and many individual Irish ministers spoke out against the agreement too.

As a protest, all the Unionist MPs resigned, forcing new elections all over Northern Ireland. Although the Unionist vote went up, they lost the constituency of Newry and Armagh to the SDLP. They began a campaign to have the Agreement abolished using the slogan 'Ulster Says No'. 'Ulster Says No' banners soon appeared on local government buildings all over Northern Ireland, including a huge one on Belfast City Hall. The mass demonstrations, led by Ian Paisley of the DUP and James Molyneaux of the UUP, continued all through 1985 and into 1986 but had little effect. In February 1986, the UUP and DUP began boycotting all UK government officials, but again, this did not change anything. The Northern Ireland Assembly, which was a relic of the failed Sunningdale Agreement, was abolished on 23 June, 1986. Some members, mainly from the DUP had to be physically dragged out of the building. In 1986, the UVF and UDA decided to use violence to try to force the abolition of the Anglo-Irish Agreement. They began a terrorist campaign against Catholics and specifically the RUC, who they saw as traitors since they were required to enforce the Agreement. Attacks on homes increased. In February 1987, a 400,000 signature petition was given to the Queen. By 1987, the government was still ignoring the campaign, and it began to dwindle away. Margaret Thatcher won the 1988 General Election and reviewed the Anglo-Irish Agreement. When the review resulted in no significant changes, most Unionists gave up hope of ever removing it and acknowledged that their campaign had failed.

All during this period, violence had continued with almost 300 murders, by all terrorist groups, between 1984 and 1987 inclusive. One of the worst massacres was on 6 Novemnber 1987 when the IRA detonated a bomb at the war memoral in Enniskillen, as crowds of civilians gathered to watch a Remembrance Day parade. One building collapsed onto the crowd, killing 11 people and injuring many more. One survivor was still in a coma in 1998. In March 1987, the British secret services shot dead three IRA members at Gibraltar, although there is still a lot of uncertainty about what exactly happened. A few days later, a loyalist gunman named Michael Stone killed three mourners at the funerals of the men. When two British soldiers accidently drove into the vicinity of the funeral cortege of those three mourners, they were mobbed and dragged out of their car and brutally murdered. The presence of media cameras meant that the murders were recorded and broadcast on televisions across the world.

As the violence continued, the UUP and DUP ended their boycott of the UK government in September 1987 in order to have talks about the possibility of having new peace talks. Around about this time, a media broadcasting ban was introduced for those organisations that advocated violence. This included the IRA, UVF, Sinn Fein and the UDA, and was designed to 'starve them of publicity'. Between 1988 and 1992, there were many attempts to create conditions for all-party talks in Northern Ireland. To simplify things, the talks were divided into three strands. Strand one concerned the internal government of Northern Ireland. Strand two concerned North-South relations. Strand three concerned UK-Irish relations. The UK also hinted that they might talk to Sinn Fein if the IRA halted its campaign of violence. Until then, Sinn Fein would be excluded from the talks.

When they finally began in 1991, the talks did not get far. Each party had a vital issue that it was not prepared to compromise upon, and none of the main terrorist groups (IRA [Sinn Fein was not invited], UDA and UVF) were represented. Any agreement that did come out of the talks would not include the people causing the violence. Something new and different was needed that could break the stalemate, and preferably something that could allow the terrorist groups to be represented. The problem with this was that most people have a problem with allowing people who use terrorist methods to enter democratic discussions. The challenge was taken up by John Hume, the leader of the SDLP. He began to have negotiations with Gerry Adams, the President of Sinn Fein concerning the possibility of an IRA ceasefire and how it could allow Sinn Fein to join the talks process. The result was a document, called the Hume-Adams Initiative, which was presented to both governments.

Around about this time, the Progressive Unionist Party and the Ulster Democratic Party were formed respresenting the UVF and UDA respectively. (Sometimes referred to as the "fringe loyalists".) This gave the loyalist terrorists a political voice for the first time, in the same way that the IRA could speak through Sinn Fein. Unlike the 1988-1992 talks, the way was now clear for terrorist organisations to be present at talks - providing they halted their terrorism by calling a ceasefire. This was vital, since it was the terrorists who were causing the violence in Northern Ireland. It was this set of the right conditions, as well as the Hume-Adams Initiative, that prompted the British and Irish governments to make an historic announcement late in 1993.