Abstract: The Federated States of Micronesia (FSM) comprises 607 islands spread across a large ocean area in the western Pacific Ocean. The federation was established in 1978 when four districts of the Trust Territory of the Pacific Islands, administered by the United States, came together. In 1986, the independent state of FSM entered into a Compact of Free Association with the United States, an arrangement that, in its current form, will continue till 2023. FSM’s federal system contains several innovative features tailored to its history, the culture and traditions of its Indigenous peoples; its island archipelago geography; and its position as a small island developing state. This chapter describes the history and development of the FSM, the legal and institutional features of federalism, and recent political dynamics, including calls for greater decentralization and secession.