In 1991 the Ethiopian government employed ethnic pluralism as an organizing principle, creating multiple ethnic-based territorial units with a “right of secession” provision. Ethiopians are watching this experiment with considerable apprehension. This paper: (1) provides a concise historical background of ethnic relations in Ethiopia, (2) examines the type of ethnic federal state established in Ethiopia, and (3) points out some problems encountered with ethnicity as an organizing principle and attempts a preliminary assessment of the ethnic-based federal experiment. The sources of data for this paper include public documents, fieldwork, and interviews with 30 knowledgeable Ethiopians in Addis Ababa. I spent several months during 2000–2002 observing political developments in the country as they pertain to ethnic federalism. Within Africa, a nation-state fully acknowledging and based on ethnic pluralism is unique. Thus far, the Ethiopian federation appears to have undercut the drive for secession by largely removing its rallying cause, manifest ethnic oppression. Nonetheless, the fact that the ruling group comes predominantly from a small ethnic group has raised serious protest from other ethnic groups, larger and smaller. Its use of democratic centralism has also undermined effective decentralization and democratization. Ethnic pluralism as an organizing principle underpinning the federal government in Ethiopia is a fragile and perilous experiment.