According to: Nicholas Dodman, Director of the Animal Behavior Clinic, Cummings School of Veterinary Medicine, Tufts University
Divide and Conquer
To settle an inter-cat dispute, you'll need to separate the warring parties and then gradually reintroduce them. The setup goes something like this: Isolate Cat A, the aggressor, in Area A, along with a litter box, cat bed, toys, and water. Confine Cat B, the victim, to Area B, which can pretty much be the rest of the house. Twice a day, at mealtimes, bring the cats together on either side of a closed door, and entertain them with toys, petting, and other things they enjoy. Although the cats won't see each other, they will smell and hear each other, and, it's hoped, associate each other's close presence with good times. Do this for as long as necessary, swapping spaces periodically to keep the animals from getting territorial.
Keep Your Enemies Close
If all is peaceful, crack the door open an inch and secure it, so that the cats have limited visual access to each other. If no flare-ups occur, set a window screen or a baby gate in the doorway and partially cover it with paper, upping the visual access to about four inches. The next stage, once peace reigns, is to remove the paper. Ultimately, you'll want to have the cats in the same room, gradually spending more time together.
Take the Long View
If the cats revert to hissing, repeat your last step and let things calm down before proceeding. Try not to despair. Some cats are so adversarial, they need to be separated for good. Another option is to ask your vet about medicines like Prozac or the antianxiety drug buspirone. But I would avoid buying "calming" pheromonetreated collars or sprays, which in my experience aren't effective.