This essay begins with a discussion of the recent social science literature on the impact of ethnic, racial, and religious divisions, and then proposes a set of policies that less-developed countries should follow to help them overcome ethnic conflict. It advocates the adoption of “nation-building” policies that foster the development of a common national identity. The case of Tanzania, and the contrast of Tanzania with its East African neighbor, Kenya, is the focus of this essay. It is argued that Tanzania’s serious approach to forging a common national identity attractive across ethnic groups — which takes the form of extensive linguistic, educational, and institutional reforms — offers a model for other less-developed countries that inherited ethnic divisions in the post-independence period. An overview of empirical evidence based on original field data collection is presented, which shows that this nation-building approach has allowed ethnically diverse communities in rural Tanzania to achieve considerable success in local fund-raising for primary schools, while ethnically diverse Kenyan communities have largely failed in this task.