This thesis examines the unstable nature and dynamic impact of contemporary nationalism on the arduous process of reconstituting a modern multinational state. The basic research question concerns the relationship between nationalism and multinational democracy, or more specifically how nationalist forces may facilitate or impede the intricate process of political transition, democratic transformation and stabilization of the newly formed Bosnia and Herzegovina as a state. The findings indicate that nationalism and exclusive ethno-nationalist politics create serious inter-group security challenges and significantly hinder the process democratization, state-building and political transformation. The main obstacle to a coherent political system is based on the fact that nationalism causes an unconstrained reconfiguration of political space. This is apparent in BiH where exclusive nationalist politics continue to dominate the domestic and inter-national political agenda, thus limiting the capacity for political reforms, security and stability. As nationalism is a grave security threat to multinational states, there is a pressing need to manage nationalism with confidence building mechanisms that strengthen the state’s capacity to ensure enduring security and stability.