With the increase of ethnic conflicts and ethnic groups' mobilizations for ethno-nationalism to secure and share state power, the concept of decentralization has also been getting attention in ethnically plural countries, and many of them have taken advantages of adopting decentralization policies for the empowerment of diverse groups in their state cum nation-building process. Similarly, the requests and supports for the adaptation of different forms of decentralization as to accommodate number of political and administrative demands and claims emerging from different ethnic groups within a country has also increased in the recent past. This has induced the researcher and international actors to develop different definitions, interpretations, and objectives for decentralization on its ethnic diversity accommodation perspective. This paper attempted to conceptualize the decentralization as a tool for ethnic diversity accommodation through reviewing the existing literary definitions, explanations and with researchers' interpretive arguments. The finding reveals that decentralization initiatives, like other impacts, in number of ways, contributes to accommodate rights, interests, needs and claims of competing ethnic groups, especially of ethnic minorities and accommodate them within the larger political system and their local attachments. However, the success of this process highly depends on the mechanisms adopted for sharing powers and responsibilities; the nature, subject and decree of decentralized power; and the willingness of authorities to allow the groups to exercise those powers, with other factors.