This paper describes the sources and causes of identity conflict between the Bedouin of South Sinai and the Egyptian state, arguing that narrow conceptions of Egyptian national identity have been rejected by the Bedouin, who have responded to attempts at nation-building in the Sinai by updating and articulating a particularistic “Bedouin” identity. Ethnographic research in Dahab over the course of 2008-2012, primarily through participant observation and extensive interviews, constitutes the basis for the study. Since the return of the Sinai Peninsula to Egyptian rule in the 1980s, the Egyptian state has invested great sums in the development and integration of the Sinai. This includes agricultural and industrial development, but it has also crucially focused on the “integration of remote areas into the mainstream of Egyptian civilization.” In South Sinai, a global tourist destination, this has entailed attempts to construct a specific narrative of Egyptian national identity geared towards a commercialized culture disseminated for foreign consumption, fusing the dissemination of identities with the growth of local economies in the territory of the Muzeina Bedouin. However, neither market expansion nor the dissemination of Egyptian identities have successfully integrated the Bedouin into the ideal Egyptian order. Instead, it has activated social tension and economic conflict between the Bedouin on the one hand and Egyptian migrants and state authorities on the other. The Bedouin have reacted by rejecting Egyptian identities and working to strengthen and update their own. This has been accomplished through the construction and reinforcement of an identity boundary and the adaptation of Bedouin identity drawing on an alternative pool of cultural symbols, namely those of the tourists. The marketization of culture has encouraged competition between “Egyptian” and “Bedouin” identities, but has largely precluded violence as a feasible strategy by either the state or the Bedouin. Economic pressures have encouraged the Bedouin to adopt a relatively progressive political outlook. Simultaneously, the Bedouin have come to reject the legitimacy of the Egyptian state and any identification with the Egyptian nation on an ethno-cultural basis. While to some extent a conscious decision, Egyptian national identity precludes the integration of the Bedouin in a way that would allow them to retain a connection to what they see as their idealized past. This has cast the Bedouin as an out-group in Egyptian national society, discouraging national loyalties, undermining integration attempts, and reinforcing sociopolitical instability.