Abstract This article attempts to answer the question: is Ethiopian federalism sustainable? Once deemed a thought vanguard of building Ethiopia as a new ‘multi-national’ state, existing philosophical and institutional design limitations are increasingly making its sustainability problematic amidst the revival of its rival alternatives-unitarism and secessionism. This article argues for re-inventing the system in the spirit of loose federalism, ensuring its continued relevance to the fast changing political climate in Ethiopia. To this end, it calls for a robust revisit, re-negotiation and redesign of i) distribution of self-rule and shared rule powers, ii) vertical and horizontal inter-governmental relations, and iii) House of Federation of the system. A central challenge is how to secure sufficient political trust between the federal and regional governments and among the regional governments of the federation. This requires a ‘workable platform and rules of the game’ for running a smooth grand elite bargaining process.