Ethiopia as a modern multicultural and multilingual state emerged in the second half of 19 century following the military expansion of Emperor Menelik II. Paradoxically, since then for about more than a century political and legal protection had not given to the inherent multicultural and multilingual realities of the nation. However, 1991 was remarkable in the sense that the new government led by Ethiopian People Revolutionary Front (EPRDF) adopted Ethnic Federalism with the view to constitutionally recognize and institutionally accommodate the issue of nationalities in the history of Ethiopia. Although the constitution established two levels of governments and conferred them with different sets of responsibilities they are interdependent in a wide range of important political, economic and social matters. Indeed, the interdependence of the federal state and the regional states necessitates their cooperation and hence effective form of policy coordination through sound intergovernmental relations (IGR) is crucial for the smooth and efficient application of their responsibilities. The presumption in such institutional arrangement is that the federal and constituent units are represented in intergovernmental relations institutions so that decisions/ policies passed takes in to account the interest of both orders of government, states and federal. This article has attempted to examine the practice and theories of Inter-Governmental Relation (IGR) in the Ethiopian Federalism from policy coordination perspectives using secondary sources/document analysis and found out that, theoretically, the 1995 constitution is neither clear on the system of vertical intergovernmental relations (IGR) and, practically, nor in establishing guiding principles/institution in charge with such authority. Hence, the status of intergovernmental relation and policy coordination in Ethiopia not only dominated by the federal government but also largely carried out by informal channels.