Start over. Redecorate and rearrange from scratch, with input from both kids. No need to make a big investment -- painting the room a color they both agree on and letting them decide where to put the beds can go a long way. Keep curtains and quilts neutral, and let each child decorate his bed with throw pillows or stuffed animals that complement his brother's. If there's room, this would be a good time to separate bunk beds, so each child can have his own sleeping area.
Get them organized. Designate specific drawers, bookshelves, and closet space for each child. Set a specific time each day when both will be responsible for neatening up -- making beds, tossing dirty clothes in the hamper, putting away books and art supplies. As for common areas, have them agree on two times during the week when they'll tidy up together.
Give them privacy. Let each child schedule a period of time to be alone in the room each day. A ground rule: Anyone who disturbs his sibling during "reserved" time loses a block of his own. If space allows, you can also rig a curtain between the beds that can be opened when the kids want to be together and closed when they don't.
Let them lay down the laws. Have your kids -- together -- create a list of bedroom rules and consequences for breaking them. For instance, they can agree not to borrow each other's clothes, toys, and crayons without asking, and allow their sibling to pick something to "borrow" back if he violates the rule. Have them post their rules on the door as a reminder.