This article presents results from a case study of hydropower licensing, a program that was transformed during the period 1978-1988. New legislation promoted extensive development of hydropower projects and stimulated reactions by a threatened environmental community. The Federal Energy Regulatory Commission altered virtually every significant aspect of its licensing program in response to these external pressures. More than remarkable adaptability, this case demonstrates that regulatory institutions may yield their discretionary powers in order to maintain productivity and responsiveness. While they are closely related in most regulatory situations, productivity and responsiveness are sometimes incompatible. When such a conflict occurs, this research suggests that the agency may sacrifice a degree of productivity to maintain responsiveness. This study also shows that through the creative use of familiar regulatory tools, notably rule making and negotiation, an agency can enlist external agencies and groups in its efforts to be productive and responsive.