Inter-ethnic relations between Albanians and Macedonians in Macedonia have been rather problematic since the times of former Yugoslavia. After independence, the new constitution of the Republic of Macedonia instead of improving it has further downgraded the position of Albanians and other minorities living in the country. The non-fulfilment of Albanians’ core demands led to an armed conflict in 2001. The Ohrid Agreement has in addition to ending the armed conflict, also provided for a range of legislative and policy measures to improve the position of the Albanians by ensuring equality and minority protection. However, 16 years after the Ohrid Agreement, inter-ethnic relations in Macedonia still remain burdened by prejudice and stereotypes, rather than cooperation and mutual prosperity. The main aim of the paper is to analyse the state of inter-ethnic relations in Macedonia, with special focus on relations between ethnic Macedonians and ethnic Albanians. The paper also offers an analysis of main factors that contribute to inter-ethnic tensions in the country and explores possible scenarios in the future. The most relevant part of the paper analyses the causality between inter-ethnic and interstate relations. The paper claims that similarly to most of the countries in the Western Balkans, inter-ethnic and interstate relations are basically the components of the same equation. The paper concludes that in Macedonia, Kosovo rather than Albania is much more relevant for the causality between inter-ethnic and interstate relations in Macedonia, and it also offers several reasons to support such thesis. Accordingly, the overall inter-ethnic relations between Macedonians and Albanians in Macedonia heavily depend on inter-state relations between Macedonia and Kosovo and vice versa.