  Motivated by the recent observations of the peak effect in high-$T_c$ YBCO
superconductors, we reexamine the origin of this unusual phenomenon. We show
that the mechanism based on the $k$-dependence (nonlocality) of the
vortex-lattice tilt modulus $C_{44}({\bf k})$ cannot account for the essential
feature of the peak effect. We propose a scenario in which the peak effect is
related to the melting of Larkin domains. In our model, the rise of critical
current with increasing temperature is a result of a crossover from the Larkin
pinning length to the length scale set by thermally excited free dislocations.
