Using data from the 1988 Party Elite Study, this paper tests two different models of how interests and parties are related among a national sample of state and local party leaders and activists. Two models of interest intermediation are compared: the pluralist model stressing consensus and bipartisanship, and the party government model stressing conflict and partisanship. New research is reviewed suggesting that political interests have become nationalized and work within the parties. Using Stinchcombe’s "crucial experiment," opposing assumptions of the two models are compared. While we do not test whether interests and parties are equally strong, we do find that strong parties and strong interests share a complementary, even intimate relationship. Strong support is found for the pervasiveness of interests among party elites, the presence of distinct party-linked ideological differences between group members and non-members, linkage between interest membership and organized party factions, group structuring of political information and communication, and a group consciousness. Based on these findings, we find support for the advent of true factions in the contemporary party system, and the conflict model of partisan intermediation in the post-reform party system is confirmed. The fact that interests are so strongly intertwined with the state and local parties provides disconfirmation of the pervasive myth that strong interests lead to decline at the grassroots.