Local governments in the United States frequently collaborate with neighboring localities for service provision despite the high costs of this strategy. Using the Institutional Collective Action (ICA) framework, this article argues that a key explanation of interlocal collaboration lies in the way local leaders learn from the behavior of neighboring jurisdictions that collaborate, which alters the transaction costs of their own potential collaborations. Using a data set of financial transfers for 35,000 jurisdictions over a 30-year span, the article shows that localities are more likely to collaborate when a larger share of their neighbors collaborated in the past.