In recent years, traditional creditors and international organizations have been pressuring China to provide sovereign debt relief to developing countries. Analyzing how industrialized countries represented by the United States and three international organizations—the International Monetary Fund, the Paris Club, and the World Bank—responded to the wave of debt restructurings since the 1980s, this paper finds that when market-based approaches solely could not resolve debt problems, traditional creditors turned to government-supported debt reduction, exemplified by the Brady Plan; international organizations likewise moved from opposing debt reduction to launching schemes such as the Toronto Terms and the Heavily Indebted Poor Countries Initiative, while establishing rules to constrain free-riding. Two factors underpinned this transformation: first, the bargaining between creditor-country governments and financial institutions, and second, the institutionalization of debt relief mechanisms by various creditors to overcome collective action problems. Global sovereign debt governance, therefore, has not been entirely market-based, but instead reflects growing government engagement.