Is ethnic federalism good or bad for Ethiopia? Scholars of various kinds disagree. For some consequentialists, ethnic federalism deepens ethnic differences and leads to separatism; for others, it is preferred to the forced integration of distinctive ethnic groups and the suppression of group rights. To some constitutionalists, ethnic federalism will succeed with greater fidelity to the Ethiopian Constitution, yet others view the Constitution as limiting ethnic federalism’s efficacy. Whatever the perspective, no consensus exists on its merits. This chapter examines ethnic federalism as an institutional design mechanism to balance the tension between the Constitution’s transformational and preservative elements. Although the Constitution was initially transformational, ethnic federalism was likely the most attractive preservative institutional design mechanism for the ruling elite to maintain power. The tension became clear during the 2005 election, marking the end of the first period of transformational Ethiopian constitutionalism. The chapter views the adoption of ethnic federalism as a preservative tool consistent with the ruling elite’s incentives.