In this paper, the optimum tradeoff between diversity and multiplexing gains in a two-user quasi-static Rayleigh fading interference channel (IC) is studied. The diversity and multiplexing gains are two basic performance measures in wireless networks which characterize the transmission reliability and the data rate, respectively. It would be of interest to investigate the optimal tradeoff between these two measures. First, we develop a coding scheme for the two-user quasi-static Rayleigh fading Gaussian IC with interference level α := log INR/log SNR ≥ 1. Then, for this coding scheme the achievable diversity-multiplexing tradeoff (DMT) is characterized. Our achievable DMT coincides with its outer bound. In the low and high rate regions (to be defined later), the proposed coding scheme is a one-level Gaussian code, independent of the channel state information (CSI). In the middle rate region (to be defined later), the proposed coding scheme, depending on the partial CSI, can be a one-level or a two-level Gaussian code. We show that the relevant partial CSI can be represented by only one bit determined by the absolute value of the channel gain. In the middle rate region, we assume that the single-bit partial CSI for all the four channel gains of the Gaussian IC are available at both transmitters.