In hierarchical structure formation, merging of galaxies is frequent and known to dramatically affect their properties. To comprehend these interactions high-resolution simulations are indispensable because of the nonlinear coupling between pc and Mpc scales. To this end, we present the first adaptive mesh refinement (AMR) simulation of two merging, low mass, initially gas-rich galaxies (1.8e10 Ms each), including star formation and feedback. With galaxies resolved by ~2e7 total computational elements, we achieve unprecedented resolution of the multiphase interstellar medium, finding a widespread starburst in the merging galaxies via shock-induced star formation. The high dynamic range of AMR also allows us to follow the interplay between the galaxies and their embedding medium depicting how galactic outflows and a hot metal-rich halo form. These results demonstrate that AMR provides a powerful tool in understanding interacting galaxies.