Peace efforts had begun in 1812 even before hostilities got under way. The British, after all, had repealed their Orders in Council two days before the declaration of war and confidently expected at least an armistice. Secretary of State Monroe, however, told the British that they would have to give up the outrage of impressments as well. Meanwhile Czar Alexander of Russia offered to mediate the dispute, hoping to relieve the pressure on Great Britain, his ally against France. Madison sent Albert Gallatin and James Bayard to join John Quincy Adams, American ambassador to Russia, in St. Petersburg. They arrived in 1813, but the czar was at the war front, and they waited impatiently for six months. At that point, the British refused mediation and instead offered to negotiate directly. Madison then appointed Henry Clay and Jonathan Russel to join the other three commissioners in talks that finally got under way in the Flemish city of Ghent in August.

In contrast the array of talent gathered in the American contingent, the British diplomats were nonentities, really messengers acting to the Foreign Office, which was more concerned with the effort to remake the map of Europe at the Congress of Vienna. The Americans had more leeway to use their own judgment, and sharp disagreements developed that had to be patched up by Albert Gallatin. The sober Adams and the hard drinking, poker playing Clay, especially rubbed each other the wrong way. The American delegates at first were instructed to demand that the British abandon impressment and paper blockades, and to get indemnities for seizures of American ships. The British opened the discussions with demands for territory in New York and Maine, removal of American warships from the Great Lakes, an autonomous Indian buffer state in the Northwest, access to the Mississippi River, and abandonment of American fishing rights off Labrador and Newfoundland. If the British insisted on such a position, the Americans informed them, the negotiations would be at an end.

But the British were stalling, awaiting news of victories to strengthen their hand. The news of American victory on Lake Champlain arrived in October and weakened the British resolve. Their will to fight was further eroded by a continuing power struggle at the Congress of Vienna, and by the war weariness of tax burdened public. The British finally decided that the game was not worth the cost. One by one demands were dropped on both sides until the envoys agreed to end the war, return the prisoners, restore the previous boundaries, and settle nothing else. The questions of fisheries and disputed boundaries were referred to commissions for future settlement. The Treaty of Ghent was signed on Christmas Eve of 1814.