Iraq is a society in transition, grappling with the universal challenges of establishing forms of governance and allocating power within the institutions of the state. As Iraqis work to develop effective systems of governance, a key debate is over the nature and appropriateness of federalism as an option for Iraq. Iraq has always been ethnically and religiously diverse and has historically allowed minority communities to co-exist in harmony with the majority populace, but the present situation has fuelled discord and violence between some groups. Key points in the debate concern whether federalism will strengthen the Iraqi state or weaken it, and whether to undo boundary changes implemented by the Ba’ath party after 1968. The nature of governance in Iraq is tied directly to the distribution of oil revenues, and implementing a successful federal system in the country is necessary to safeguard Iraq’s economic stability and its political legitimacy. This report, the third from the "Iraq's New Reality" conference series, suggests that the concept of federalism is not widely understood in Iraq, and recognizes that federalism is just one option that could help provide long-term stability and accommodate Iraq’s diverse citizenry. This report was produced jointly by CIGI and the Stimson Center in Washington, DC.