Successive governments have attempted to create institutional design mechanisms for governing Iraq as a divided society. Contemporary works on governing in divided societies and Iraq ignore or devalue critical and historically contingent factors of citizen-states interactions. This study aims to situate the relevance of institutions as governing structures by converging existing works on governing in divided societies and state formation with historical institutionalism as an approach for contextualizing the ways in which divided societies reproduce governing structures that reinforce the saliency of ethnic conflict. A key obstacle to the 2003 invasion has been the development of governing strategies for Iraq as a divided society. Current works on governing in Iraq often neglect and undermine the impact of the country’s political history and the limitations of development effective governing institutions on ethnic conflict. This paper analyzes Iraq’s early institutional design on a continuum in order to conceptualize the role of institutions as variables for exacerbating ethnic and sectarian identities. It hypothesizes that a comprehensive understanding of the current dilemmas in governing Iraq requires an analysis of the preceding critical processes that shaped governing structures and institutions since the establishment of the Iraqi state that have produced—and continue to reproduce weak state structures and institutions that exacerbate ethnic conflict. The aim is three-fold. First, to demonstrate the importance of engaging in a contextual analysis of institutional design in divided societies—that is, to pay attention to how Iraq’s early institutional design has affected ethnic conflict. Attention here is paid to issues relating to critical junctures, timing and sequencing, and path dependence as they relate to Iraq's early state formation. Second, it aims to bridge a conceptual gap between the literature on governing in divided societies and historical institutionalism by illumining the relevance of the latter as a tool for explaining historical and contextual causal links missing in the former. Third, it hopes to provide a new analytical approach to conceptualizing and contextualizing the role of a historical analysis of early institutional design on ethnic conflict in divided societies.