<i>Background</i>: Ethiopia's rich ethnic diversity has long been a defining feature of its social landscape. The coexistence of numerous ethnic groups within the country offers both opportunities for cultural enrichment and challenges for the formation of a coherent national identity. Historical, political and social dynamics have shaped the complex interplay between ethnic identity and the quest for national unity, warranting a critical examination of the converging forces influencing the socio-political fabric of Ethiopia. <i>Objective</i>: This study aims to systematically analyze the challenges and opportunities related to ethnic identity and national unity in Ethiopia in order to identify ways to build a sustainable national consensus amidst ethnic diversity. By shedding light on the nuanced dynamics of ethnic identity formation, social cohesion and political agency, the study aims to identify strategies that promote inclusive nation building while respecting the diversity of Ethiopia's ethnic mosaic. <i>Main Findings</i>: The study examined the historical roots of ethnic identity formation in Ethiopia and shed light on the legacy of various cultural traditions, historical grievances and political developments that have shaped contemporary perceptions of ethnicity. It also critically assessed the impact of ethnic federalism, decentralized governance and ethno-nationalist aspirations on the overall quest for national unity and cohesive statehood. Furthermore, the study explored the challenges posed by inter-ethnic tensions, identity-based conflicts and socio-political fragmentation, while identifying the potential opportunities for promoting dialog, reconciliation and inclusive citizenship to strengthen national consensus. <i>Methodology</i>: Using a qualitative approach, the research draws on a comprehensive analysis of secondary sources, including academic papers, historical documents, policy papers and ethnographic accounts. By synthesizing insights from different disciplines such as anthropology, political science and social history, the study has created a holistic understanding of the multi-layered dimensions of ethnic identity and national unity in Ethiopia. <i>Conclusion:</i> The complex dynamics of ethnic identity and national unity in Ethiopia underscore the need for inclusive policies that respect the diverse cultural heritage while promoting a common national identity, recognizing historical grievances, addressing inter-ethnic tensions and fostering dialog. Balancing the diverse ethnic mosaic within a unifying national narrative is critical to moving towards sustainable nation building.