PORTLAND — The city of Portland and the University of Oregon have settled their dispute over the prominent downtown sign that reads “Made in Oregon.”

The sign is above the university’s new Portland campus in the city’s Old Town district. The school wanted it to read, “University of Oregon.”

The idea upset those interested in preserving the sign as a piece of history as well as partisans of Portland State University, whose campus is in another part of downtown. Led by Portland State grad and Commissioner Randy Leonard, the city threatened to use eminent domain to keep the sign unchanged.

On Wednesday the two sides announced a compromise. The sign will read, simply, “Oregon.”

On a nearby water tower, the university will put a big “O” for Oregon. The measure will need approval by a heritage commission.

The University of Oregon spent more than $2.1 million since 2006 renovating a four-story building at the west end of Burnside Bridge over the Willamette River, the Eugene Register-Guard reported.

University officials had long seen the sign as a marketing tool, an advantage offsetting the building’s location in a part of town known for homeless people.

The sign is shaped like the outline of the state, and it is notable for its leaping deer — with a red nose during the holidays.

When built in 1940, it read “White Satin” for a sugar company. In 1957, it was changed to “White Stag” for a clothing company. In 1995, it was changed to “Made in Oregon” for a retail chain. The chain’s lease on the sign has expired.

A sign company owns it. Under the compromise, the university will exercise its option to buy it.