Federations can be different at the level of centralism and in practices of governance. Due to such idiosyncratic features, states can be considered as centralized on the basis of the powerful federal government at the centre or decentralized because of the implementation of the theory of devolution of power and majoritarian federations due to the influential position of majority ethnic groups of the society. Certain federal states can apply a multi-dimensional system of governance, power and authority, while some other states can ascent more centralized and powerful governance. Some scholars alleged that the capability of the Federal state to meet the issue of ethnic diversity diverges transversely to its commitments and different structures. The aforementioned is further claimed that “a formal federal system functions in practice as a unitary system; the system's capacity is not according to the needs to accommodate ethnic and national cleavages” (Kohli, 2004). On the basis of such suggestions, this research paper endeavors to examine federalism as a tool to manage ethnic diversities in Pakistan. This paper argues that a more effective paradigm of the power sharing mechanism can be fruitful to enable federalism in Pakistan to manage ethnic diversities more exclusively.