Following the incorporation of the unconditional right to ethnic self-determination in the FDRE Constitution, previously under oppressed ethnic groups can establish regional or zonal self-administered government. Despite its success, there are still challenges in the practical application of ethnic based federalism in Ethiopia. Within this framework, this study aims to assess the impacts of ethnic based federalism in developing national identity in Silte zone. The qualitative approach with descriptive survey study research design was employed. Interview, observation, document analysis, legal analysis, and literature were used to collect data. Thematic method of data analysis was employed. By purposive sampling out of 10 woredas and 5 town administration six woredas were selected, four institutions were selected, 48 civil servants for interview were selected, 2 federalism experts were selected as the source of data. According to the finding of the study even though ethnic based federalism results in many challenges in the process of nation building in Ethiopia it ensures partially socio- economic, political and cultural development in Silte zone. The finding of the study also indicates that beside its positive outcome ethnic based federalism results negative impacts on nation building such as decline in national identity, it erodes common values, symbols and our common identities, imbalance between ethnic identity and national identity (imbalance between components of self-rule and shared rule), it results in excessive sense of division, isolation, and frustration to have property to exogenous people in Ethiopia. In addition to these ethnic based federalism results in competition and conflicts between ethnic groups, specifically about “resources: land, water, minerals, and federal budgets and about power. To construct national identity and to mitigate drawbacks of ethnic based federalism in Silte zone the finding of the study revealed several mechanisms such as balancing self-rule(ethnic identity) and shared rule(national identity), conducting national identity plat forum (national discourse on how to construct national identity in multinational states), reforms in early schooling system and educational curriculum, legal requirement for collective rights of exogenous groups, power sharing through zoning of political and bureaucratic posts, building democratic federalism, special programs designed to bring young people together, and ideologies designed to raise consciousness about tolerance, unity, loyalty, discipline, and obedience and designing mega projects like renaissance dam to unite the people are also mechanism to balance ethnic identity and national identity in Ethiopia and in Silte zone in particular. Based on the conclusions, the following recommendations are made to resolve the negative impacts of ethnic based federalism in developing national identity in Silte, such as the Silte zonal government should balance promoting ethnic identity with national identity, and the Silte zonal government should conduct consistent national discourse or national plat forum on how to construct national identity, the Silte zonal government should build democratic federalism, there should be institutions to promote national identity parallel with ethnic identity at federal, at regional and at zonal level, there should be curriculum revision in a way to integrate common values, history and culture in education system especially at students earlier schooling age, as common working language is an instrument for nation building and constructing national identity emphasis should be given for the teaching of Amharic (it is the federal working language),the federal government should design mega projects like Renaissance dam to unify the people in Ethiopia, there should be: legal recognition for collective rights of exogenous groups, power sharing through zoning of political and bureaucratic posts, Special programs designed to bring young people together, and ideologies designed to raise consciousness about tolerance, unity, loyalty, discipline, and obedience. Keywords: ethnic federalism, national identity, federalism, ethnic identity DOI: 10.7176/IAGS/95-03 Publication date: June 30 th 2022