The paper outlines the opportunities and challenges of federalism in community development in Somalia. In 2004 Somali elders and politicians considered adopting federalism and in 2012 Somalia adopted federalism and established four states: Jubaland, Galmudug, Hirshabelle, and the Southwest States, in addition to the previously established states Puntland and Somaliland. This paper focuses on how federalism affects community development in Somalia and identifies opportunities and challenges of federalism for community development. With federalism, the opportunities that it provided to the community were security, economic improvement, a better education system, a healthcare system, distribution of power, political stability, and women’s and youth’s empowerment. The challenges it posed were border conflicts, power disputes, the exploitation of natural resources, and minority injustice. The method used for this research is a survey data analysis.