Abstract: Indeed, Ethiopia is a heterogeneous state. And the successive regimes have implemented their respective strategies towards diversity that left its own good and bad legacies. Since 1991, the state has unprecedentedly experimented ethnic federalism as a means to accommodate ethnic diversity. Therefore, this study has explained dynamics of ethnicity and ethnic relations since the inception of ethnic federalism. The paper employs qualitative research design and draws heavily on secondary sources, including books, journals, researches and reports of various institutions. Nevertheless, the data collected through in depth interview, observation, social media discourses is also consulted and analysed thematically. Theoretically, transactive approach as alternative explanation to ethnicity and ethnic conflicts in Ethiopia is discussed as part of the analysis in various sections. The paper demonstrates that in Ethiopia; ethnicity is neither blindly primordial nor completely manipulable. It is thus, a matter of categorical ascription and social organization in terms of culture and history, similarity and difference. Ethnic conflict is not also merely out of primordial differences or mobilization by ethnic entrepreneurs. But it is the result of feelings and sentiments in which members of a particular group develop as they interact and compare their positions with other ethnic groups. In doing this, the finding of this study bridges the extreme schools of thought in ethnicity: primordialism and instrumentalism.Abstract: Indeed, Ethiopia is a heterogeneous state. And the successive regimes have implemented their respective strategies towards diversity that left its own good and bad legacies. Since 1991, the state has unprecedentedly experimented ethnic federalism as a means to accommodate ethnic diversity. Therefore, this study has explained dynamics of ethnicity a...Show More