CLEVELAND, Miss.—The Illinois Central railroad tracks that once separated residents, white from black, have been torn out to make way for a landscaped promenade.

Cleveland's largest high school, founded in 1906 exclusively for the children of white residents, now has nearly equal numbers of black and white students.

But nearly a half century after a federal judge ordered Cleveland to begin school desegregation, government attorneys have returned to court to argue the district must, once and for all, "fully dismantle its racially identifiable one-race schools," in a legal battle that is again dividing the town.

Public schools east of the former railroad tracks are still virtually 100% black. Schools west of the former racial divide remain predominantly white....