After the demise of the military regime, Ethiopia commenced ethnic based federalism to address ethnic conflicts and the issue of ethnicity on the one hand and to maintain national unity on the other hand. In spite of such novel rationales, ethnic conflicts are not reduced as envisioned but accentuated and multiplied. Cognizant of such a fact, this study sought to investigate ethnic federalism and ethnic conflicts in Ethiopia taking Amhara-Afar conflict as a case study. Hence, to achieve the intended objective, the study employed qualitative case study design relying on a range of primary and secondary sources of data. While selecting interviewees, key informants and focus group discussants, both purposive and snowball sampling strategies have employed. The data obtained from secondary and primary sources are analyzed through thematic analysis. The finding of the study revealed that the politicization of ethnic identity, de-emphasis of national unity and identity based intra border demarcation resulted in intensification of ethnic conflicts following ethnic based federalization. Consequently, border competition and politicized ethnicity are the major causes behind Amhara-Afar ethnic conflict. Problematic reconciliation, ethnicization of the conflict and the presence of spoilers are chief factors that make the conflict recurrent. In the same vein, the study elucidated that deterioration of ethnic relations, insecurity, joblessness and addiction, and household crisis are among the grave social impacts of the conflict. Lastly, the study identified that public grievances, distrust between the government and people, and hindrance to consensus and unity are the political impediments the conflict breeds. Accordingly, the major conclusion drawn from the findings is that the recognition of ethnic identity as an overarching socio-economic and political basis paved avenue for ethnic elites to maneuver identity for socio-economic and political motives.