The objective of this paper is to contribute to our understanding of 'crisis' in higher education through the analysis of a unique series of events involving a decisive change in the relationship between a university and the state. A descriptive case study approach is used to investigate the crisis in governance at Athabasca University, an open university located in Alberta, Canada. Factors leading to the crisis included the university leadership's decision to move forward with plans to become a near-virtual organization, concerns by local town that a loss of university employees in the region would be an economic catastrophe, and political opportunism on the part of the elected provincial leaders who decided to address the problems raised by the town and shift the mandate of the university. Drawing on institutional theory and the concept of institutional logics, the paper analyses the episodic nature of the crisis and explores both the nature of the conflict and its resolution.