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This paper focuses on the politics of federalism in Pakistan. There are multiple geographic, economic and demographic variations that demanded special apparatus of management. As security, economy and identity were the common goals of all units; federal system was the most suitable answer to these issues and demands in the case of Pakistan. With an analysis of the concept, present research examines the history and constitutional development regarding federalism in Pakistan. Political life is teeming with institutions. Democracy must also flourish within the structures of political parties. If it doesn’t, democracy will flounder. Federations may vary at the level of centralization, and in the forms of governance, but political institutions are important. The paper concludes by suggesting some policy measures to improve federalism in Pakistan. Relatively decentralized and inclusive governance is more likely to enable Pakistani federation to accommodate interests, identities and working of institutions.