This paper attempts to analyse territorial reorganisation policy interventions in Macedonia, first in 1995 and again in 2004, which overreached their aims and objectives; and where economic viability and institutional reform were trumped by ethnic factors in defining local government boundaries. The core argument is that through territorial reorganisation, opportunities are provided to major ethnic political parties, both Macedonian and Albanian, in order to exercise more power by increasing their 'market share' in local governments. This paper argues that this political approach adds to a higher level of segregation among ethnic communities. Further, this paper clearly explains how balancing political, economical and institutional qualifications for the two territorial policy interventions posed challenges in Macedonia due to its citizens perceptions and demographic profile.In understanding the need for territorial re-organisations in Macedonia, one must not ignore historical legacy and developments around the region in the last decade. Immediately after Macedonia became a sovereign and independent state in September 1991, the new Macedonian constitution was drawn up and later adopted in November 1991. This revealed tensions between two major ethnic groups over constitutional nationalism and the principle of democracy. It was not until 2001 when the Ohrid Framework Agreement was signed through mediation of the international community that the country's political leadership recognised the need for a new political discourse in order to bring more social and economic progress to the country.