This study has explored ethnic federalism and ethnic conflict in Ethiopia, particularly in the light of the experience of BGRS. The central objective of the study was to critically analyze the current federal system in a manner that whether it actually served for managing ethnic conflicts or otherwise. Methodologically, the researcher employed qualitative research approach with institutional exploratory strategy. By assuming that conflict is primarily the incompatibility of divergence of interests among different groups with divergent strategies, the thesis described federalism’s particular experiment in BGRS and its some institutional attempts to deal with conflicts of different identity claims. As per the finding of this study, by underpinning to the question that, is federalism a panacea or incentive to ailments of divided societies, it seeks to underscore that, the establishment of federal system as a reaction to historic marginalization and questions of self administration right of the indigenous peoples in BGRS, it has contributed to deal with ethnic conflicts. However, it has also generated some others, such as power sharing, resource and border conflicts among different ethnic groups. Accordingly, this study has argued that federalism has two roles; one it has responded the long-standing question of nationalities to autonomy, and on the other side, it perpetuated other kinds of new conflicts, because of the politicization of ethnicity and the development of ‘theirs’ and ‘ours’ mentality in the people of the regional state.