Diaspora communities are becoming an essential part of socioeconomic and political developments of their homeland countries. The problem addressed by this study is that after ethnic federalism was implemented in Ethiopia, the Ethiopian diaspora in the US is divided along ethnic lines, causing human resource management and law enforcement challenges within the communities in the host country. The purpose of this study was to describe the impacts of Ethiopia's ethnic-based federalism on its diaspora residing in a US metropolitan area. The theoretical framework was based on Teshome and ZáhoÅ?ík's theory of ethnic federalism and Safran's theory of diaspora. The key research question examined how ethnic-based federalism in Ethiopia affects perceptions of members of the Ethiopian diaspora in the US. This qualitative ethnographic study included interviews with 15 members of the Ethiopian diaspora community residing in the Washington, DC metro area. The data were thematically coded and analyzed with the help of qualitative data analysis software. Findings revealed that the Ethiopian diaspora in the US is constantly involving in its homeland affairs, although in a fragmented and dis-unified manner. Ethnic-based federalism is not only divisive but also serving as the main source for ethnic bias among the Ethiopian diaspora. Ethnic resentment has surfaced and created a we versus them mentality in every aspect of diaspora's life activities. Recommendations include the Ethiopian government establishing a Truth and Reconciliation Commission and identifying a better form of federalism for the country. The implications for positive social change include integrating voices of the Ethiopian diaspora community in the policy making processes of the home and host governments.