At the time of writing, the expectation for a peace settlement on the Korean peninsula is greater than ever due to ongoing inter-Korean summits as well as the historic encounters between the two leaders of the US and North Korea. Although the second Hanoi DPRK-US summit in February, 2019 ended without reaching an agreement, it is still a positive sign that formerly hostile nations are willing to talk to find a way of coexistence. However, at the same time, the degree of inner conflict within the South has grown significantly since the impeachment of former President Park Geun-hye in 2017, and there exist deep discrepancies over how to approach and how to pursue cooperation with the North. The dissertation examines how and why a variety of reforms led by the progressive administrations of South Korea, ranging from foreign policies toward the North and the US to domestic policies, have intensified social conflicts and division, rather than contributing to the conflict transformation and reconciliation that they originally aimed at. In doing so, this research contributes to the field of identity politics and peacebuilding by offering novel insights into the role of narrative identity and history in contexts of protracted, identity-based conflict, and the peacebuilding process. Its particular focus is on the Korean peninsula, one of the areas where the legacy of the Cold War is still lingering and history is deeply contested and politicized. This study primarily claims that the social and political polarization within South Korea stems from fundamental disagreements over two important concepts in the formation of national identity: 1) the self, how to define South Korea, which means whether the birth of a South Korean government should be celebrated as a lawful and legitimate process, or treated as failure to establish one united nation; and 2) the significant others, the question of how to identify North Korea and the US. The research highlights the fact that narratives on the national identity of South Korea were initially crafted in the context of intractable conflicts with the North. Narrative identities created during or after the war have been formed with a strong certainty of the good self and evil others, thus being resistant to change. In particular, the narrative of conservatives was formed with the firm certainty about the North as an evil enemy. Thus, those who see the reality of the nation through the lens of this narrative find it extremely difficult to adapt to the alternative that identifies the North as a normal neighboring state with which to coexist. Secondly, this study argues that it is identity politics, in which the rhetoric of othering/exclusion is frequently applied, that has significantly affected the intensification of social and political polarization in South Korea through creating a dichotomy of good self and evil others. Both narratives have constructed antagonism toward their own hostile “others”: North Korean sympathizers, whether called pro-North, the reds, commies, or anti-South forces, in the “state-centered nationalism narrative” of conservatives that identifies the North as an arch enemy; and anti-nationalists, including pro-Japanese and pro-American collaborators, and ruling elites, in the “ethnic nationalism narrative” of progressives that views the North as part of the self based on the ethnic notion of the Korean nation, and thus as a partner for coexistence and ultimately for unification. More importantly, both of these contradictory narratives have been politicized to delegitimize political opponents, consequently intensifying societal and political conflicts within South Korea. Lastly, the study maintains that reforms led by progressive regimes failed to create an open and inclusive “dialogical space” where competing parties can reassess and redefine their narratives in the process of policy decision making and its enactment, thus deepening conflicts. Establishing a positive domestic context toward peace through creating consensus and cooperation with those who have different values and ideologies is a necessary condition for conflict transformation and peace settlement on the peninsula. Attempts to transform the master narrative on the national identity of South Korea led by progressive regimes without efforts to engage in cooperation with their political opponents have simply replaced an old narrative with a new one, rather than constructing a transcendent and integrative narrative on which conflicting parties can agree. Hence, conservatives’ resistance to narrative transformation and related policy changes has grown intensified. The present study can not only contribute to extending generality in the study of the narrative basis of conflict, but also offer theoretical grounds for rethinking inner conflicts in South Korea to lead to conflict transformation and an ultimate peace settlement on the Korean peninsula. We have seen in post-conflict societies like Germany or Northern Ireland that a political declaration or peace agreement does not necessarily lead to genuine peaceful relations and reconciliation between the former adversaries. This justifies the argument that the narrative of rightists in South Korea who construct a strong national identity that still views the North as an arch enemy should be taken into consideration in advancing peaceful relations with the North. It is a challenging task to transform narrative identity with firm certainty based on a dichotomy of good self and evil other crafted in the context of intractable conflicts. In the process of the engagement policy toward the North and peace initiatives on the peninsula, however, some degree of consensus and cooperation between conflicting groups in South Korea who have radically different conceptions of national identity is a prerequisite for ultimate peace settlement between the two Koreas.