Based on ethnographic research during an eighteen-month period in 1989-90, this article explores the rural practice of "integrated Chinese and Western medicine" (integrated medicine) in southwest China's Lijiang basin. Integrated medicine is a consciously formulated hybrid medical practice that was introduced by Chairman Mao during the Cultural Revolution as the cornerstone of national health policy. It was originally envisioned as the epistemological handmaiden of the "cooperative health care" system (of "barefoot doctor" fame). The relationship between the respective People's Republic of China (PRC) practices of "Chinese medicine" and "Western medicine" embedded in integrated medicine is explored here on two levels. Integrated medicine is analyzed both as a state policy and as an everyday practice engaged in by village practitioners and lay villagers alike. During the Maoist period, integrated medicine in the rural Lijiang basin was particularly receptive to local interpretation and experimentation by "the masses." This local license in interpreting state policy represented a point of contrast between integrated medicine and other state-sanctioned medical practices. During the ensuing first decade of the post-Mao period, a popular cultural influence on integrated medicine persisted. Integrated medicine is thus examined here both in terms of how state/urban/elite agencies have enacted processes of "syncretism from above" as well as how local/rural/peasant agencies have enacted processes of "syncretism from below" in shaping it as a therapeutic practice. Rural Lijiang basin explanatory models reveal a pattern whereby afflictions are classified according to either "medicine of systematic correspondence" criteria or "stigmatized affliction" criteria. Both types of criteria reflect distinctive interpretations and appropriations of theories rooted in Chinese therapeutic practices and "Western medicine," respectively. The rural basin practice of integrated medicine thus reflects a local appropriation and mediation of state policy, and provides some insight into the nature of a "circularity" that operates between local (or popular) knowledge and state policy in the PRC.