The United States has a long history of deploying new technology as a mechanism for public diplomacy (the conduct of foreign policy by engagement with foreign publics) but it was relatively slow to make full use of the on-line technologies known as Web 2.0. This essay reviews the early work of the US Information Agency (1953–1999) in the field of computer and on-line communications, noting the compatibility of a networking approach to USIA's institutional culture. The essay then traces the story forward into the work of the units within the US Department of State which took over public diplomacy functions in 1999. The article argues that this transition deserves a large part of the blame for the difficulty which the risk-averse State Department displayed in embracing first the web and then the full range of qualities associated with Web 2.0. The State Department has emphasized one-way broadcast media rather than two-way relational media and functions connected with listening and exchange diplomacy were subordinated to advocacy. The essay also notes the challenge of a non-diplomatic agency—the Department of Defense—playing a dominant role in digital and other forms of outreach at some points in the process. The essay ends by noting the recent evolution of the State Department's approach to digital media and the emergence of a non-governmental model for American digital outreach (known by the acronym SAGE) which may overcome many of the institutional limits experienced thus far and provide a way to bring together the relational priorities of the New Public Diplomacy with the relational capacities of Web 2.0 technology.