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The article proposes an academic understanding of federalism as a way to establish a balance between unity and diversity in ethnically heterogeneous states. The author focuses on federal tools that allow resolving interethnic contradictions and ensuring peaceful coexistence of various ethnocultural groups in the state. Based on the constitutional experience of different countries, it is shown that the relationship between federalism and ethnicity is multidimensional and is not limited only to ethnic federalism. The objectives of the study are to establish the limits of the use of both ethnic federalism and territorial federalism for managing ethnocultural diversity, to identify the conditions under which federal tools can help mitigate interethnic friction or, conversely, increase tension. The author widely uses the comparative legal research method. It is based on a comparison of constitutional and legal instruments aimed at managing ethnic and cultural diversity in different federations. In addition, the article uses the historical method (to identify and justify the prerequisites for a federal form in various states) and the formal-legal method (to analyze individual constitutional and legal norms governing federal relations). The article concludes that ethnic federalism, like territorial federalism, has its limits and can be successfully applied only in certain social contexts. Territorial federalism can be used in culturally diverse societies only under certain conditions and cannot be considered a universal or even the only "correct" form of federalism. In the context of ethno-cultural segmentation, federalism takes on new characteristics that increase the resilience of the federal system to the challenges of separatism. Federalism cannot be considered a panacea for all interethnic conflicts (in particular, it cannot be used to resolve conflicts in their acute phase or in the absence of democratic institutions), although it has proven to be an effective alternative to secession in some cases.