This study critically examines the necessity of ethnic federalism in Ethiopia, a governance model that has shaped the nation’s political landscape since the early 1990s. Ethnic federalism, designed to manage the country’s diverse ethnic groups by granting them self-governance within their respective regions, has been both praised for promoting autonomy and criticized for entrenching ethnic divisions. This analysis explores the historical context and theoretical foundations of ethnic federalism in Ethiopia, assessing its role in maintaining national unity and addressing ethnic grievances. The study evaluates the successes and challenges of ethnic federalism, particularly in fostering political stability, social cohesion, and economic development. Through a critical review of scholarly literature, policy documents, and case studies, the research highlights the complexities and contradictions inherent in Ethiopia’s federal system. It argues that while ethnic federalism has provided a framework for managing diversity, it also poses significant risks to national integration and peace. The study concludes by discussing alternative governance models that could better balance the need for ethnic representation with the imperative of national unity, offering insights for policymakers and scholars engaged in debates about Ethiopia’s future.