From 1980 to 1992, U.S. government aid funded extensive political and social reforms in El Salvador to undermine a revolutionary guerrilla insurgency and consolidate neoliberal governance. On the basis of ethnographic interviews of Salvadoran and U.S. aid managers, I examine the articulation of these U.S.-sponsored reforms with changing relations of domination in El Salvador. The interaction of notions of Salvadoran sovereignty and national identity with U.S.-promoted notions of modernity shaped the U.S. management and Salvadoran adoption of aid. This interaction favored a faction of the Salvadoran elite that defined itself as “progressive” yet not too beholden to the United States. As U.S. aid managers favored a Salvadoran elite compatible with U.S. governance schemes, this emerging local class engaged with development projects by relating them to its own evolving notions of national identity and sovereignty.