Extending rewrite rules

I am trying to extend the rewrite rules for a directory.

I am setting up 50 pages, 1 for each state. The default rewrite rules handle these pages.

EX: http://www.domain.com/directory/california

However, I want to extend URLs to also include one more level of detail – cities.

EX: http://www.domain.com/directory/california/san-diego

However, doing this returns a 404 because there is no page created for San Diego. I don’t want to create pages for San Diego. I essentially want this:

http://www.domain.com/directory/california/san-diego

rewrites to

http://www.domain.com/directory/california?city=san-diego

I will use template logic to then determine if a city is defined – if so, show all listings within the city. If no city is defined, show all the available cities for the current state.