Federalism (from the Latin f?dus, "covenant") is a system of government in which power is divided by constitutional right between national and local units of government in regions. A state that follows the federal system is known as a federation. Examples of federal systems include the governments of Australia, Belgium, Canada, Germany, Malaysia, the former Soviet Union, Switzerland, the United States of America, and the former Yugoslavia. Some countries, whilst not being formal federations, function like them - Spain, for instance, gives more powers to its autonomous communities than most federations to their constituent parts.

Unlike unitary systems, in which the powers of the local units of government are granted to them and can be varied or taken away by the national legislature, in a federal system the local units of government have their own independent constitutionally guaranteed authority. However they remain sub-units of one overall state, and thus do not have national sovereignty and have no standing under international law. In general, the local units of government cannot undertake an independent foreign policy, nor can they have standing armies without permission of federal government.