Madara did contact the Nara who agreed to moderate the peace treaty between the Uchiha and the Senju, but the Daimyo of Fire Country found out and ordered Madara, Hashirama and their heirs to come to the Capitol so that he, the Daimyo, may oversee and approved of the treaty.
Hashirama beamed at Madara from across the table. At Hashirama's side sat his wife, Mito Uzumaki, and his cousin and Heir, Touka Senju. Izuna was at Madara's side.
The Daimyo looked at the Heads of both families. "You both agree to peace?"
"Yes."
"Of course! I've wanted peace between us since we were boys!"
"Very well," The Daimyo leaned forward "Let us begin. I propose uniting the Senju and the Uchiha through marriage. As Hashirama-sama is already married, that leaves you and your brother, Madara-sama."
Madara bowed his head respectfully to the Daimyo "That will not be able to happen. Somehow it has not been brought to your Lordship's attention, but Izuna and I have recently married."
The Daimyo leaned back in his chair and glared at one of his aides who flushed purple "I see. And I assume you do not wish to set your wife aside?"
"I will not set my spouse aside." Responded Madara.
"Nor will I." added Izuna.
Hashirama waved his hands "No, no I don't want that! I'm sure that eventually members of our Clans will marry one another."
"Very well," said the Daimyo "Hashirama-sama, I believe that you desire for the Senju and the Uchiha to live in the same village?"
"Yes," chirped Hashirama happily. "That's one way where the Senju and the Uchiha will inter-marry but it will also be easier for us to protect each other, grow crops and all sorts of things."
Madara inclined his head "I agree to living in the same village. For the time being, I believe that it would be beneficial for each Clan to have their own districts within the village."
"Why?" asked the Daimyo.
"Old resentments," Izuna spoke up. He gave a veiled look to Hashirama and added "Both my wife and Madara's spouse have suffered much at the hands of the Senju, they are willing to live in the same village, but they want nothing to do with the Senju."
Hashirama gasped dramatically "What are their names? I'll personally apologize to them."
"No." Madara's words and tone held great finality. "You will not be permitted to speak to or even approach our spouses. In fact, part of the peace agreement must be that no one from either the Senju or the Uchiha can enter the other's district without express permission from the Clan Head."
Hashirama protested loudly "But how will our people become friends?! They have to interact with each other to become friends!"
"They can form squads, train and go on missions together." Responded Madara.
Mito Uzumaki, who had been watching Madara and Izuna closely, gently placed her hand on the arm of her husband and whispered in his ear. Hashirama pouted briefly "Fine, I agree to that stipulation."
The negotiations took place over three months as all the parties involved had other business to address.
It was agreed that the village would follow the design that was created by an unknown Uchiha Clansman. The design was much exclaimed over by Hashirama who gushed about the simple yet complex elegance of the plans.
Touka Senju examined the plans closely noting that it looked like many of the pages had pieces of the parchment cut away.
Madara smoothly replied that the removed portions had been margin notes by the architect that were no longer necessary.
Touka gave him a dubious look but dropped the subject.
The village that became Konohagakure, or just Konoha, began taking shape in the late winter with the idea to have many things built in time for the farmers to be able to plant Spring Crops.
The Senju and the Uchiha moved into their respective Districts after the wall protecting the village was completed. Some of the younger members of the Clans, who had not participated in as many of the battle against each other as their older kin, chose apartments outside their respective districts and became friends with each other without being underneath the watchful and critical eyes of their elders.
As much as Hashirama tried, he was never able to meet Madara and Izuna's spouses, nor was he ever able to set foot into the Uchiha District during his lifetime.
Touka Senju and Mito Uzumaki never asked to enter the Uchiha District and not once did they ask about the never-seen spouses beyond basic enquiries about their health.
Uchiha lore says that Madara, his husband Asahi, Izuna and his wife Asami all died within days of each other. They were buried together beneath a Sakura tree.