The progressive decade of the Kim Dae-jung and Roh Moo-hyun government showed a remarkable improvement in inter-Korean relations through two summit meetings and expanded exchanges and cooperation. However, as the Lee Myung-bak (MB)’s conservative government stepped into power in February 2008, the overall landscape was radically altered. Whereas exchanges and cooperation between two Koreas have been virtually suspended, military tension has been heightened as evidenced by the sinking of Cheonan naval vessel and shelling of Yeonpyong island. Blame should be placed on Pyongyang first, but the Lee Myung-bak government equally responsible for such development. Its emphasis on impractical principles and lack of pragmatism, a wishful thinking on the coming collapse of North Korean regime, and universal value that overlooks North Korea’s peculiarities has brought a major setback to the inter-Korean relations. Given time constraint, it might not be easy for the MB government to reverse the trend. Yet, a more practical and forthcoming engagement is needed for peace and stability on the Korean peninsula.