<p>Stigma is relational and intersubjective, as it depends on how stigmatizing audiences and stigmatized actors make sense of it. However, little research has investigated the nuances of the interaction process through which stigma comes to be recognized and eventually removed. We address this puzzle by studying stigma in the field of cooperatives in the Lazio region of Italy. Following the involvement of one cooperative in illegal activities, cooperatives in the region were stigmatized by its exchange partners: nonprofit organizations and local governments. Cooperatives’ initial strategy to remove stigma led their exchange partners to change their perception of the root causes of the stigma affecting cooperatives. Cooperatives recognized this change through interaction with their exchange partners and therefore adapted their stigma-related strategy. This process successfully removed the stigma and transformed the way in which cooperatives engaged in exchanges with their partners. Building on this evidence, we develop an interaction-based process model of stigma recognition and removal that reconnects and extends the research streams on stigma and organizational fields.</p>