Attorney General, initially in elegant old US city (7)
I believe the answer is:
chicago
'us city' is the definition.
(Chicago is a US city)
'attorney general initially in elegant old' is the wordplay.
'initially' indicates taking the first letters.
'in' is an insertion indicator.
'elegant' becomes 'chic' (chic means fashionable or elegant).
'old' becomes 'o' (common abbreviation eg in OE for Old English).
The first letters of 'attorney general' is 'ag'.
'chic'+'o'='chico'
'ag' inserted within 'chico' is 'CHICAGO'.
(Other definitions for chicago that I've seen before include "American city; musical" , "Port on Lake Michigan" , "US city - musical featuring All That Jazz" , "Windy City of USA" , "Type of bridge" .)