Language is one of the most important cleavages along which ethnic identities are formed and shaped. Yet, in addition to being an identity marker, language is a policy area, in which the state cannot remain impartial toward the interests of the speakers of different languages in a country. The main research questions of my dissertation are how minority language policies are formed and how different policy outcomes affect likelihood of ethnic conflict. Recent empirical evidence suggests that ethnic conflicts are likely to occur along linguistic lines at least as much as religious ones. Despite this finding, the role of language policies in occurrence of conflict remains uncovered. I claim that this is partly due to paying insufficient attention to how minority language policies are formed while explaining the link between language and ethnic conflict. Language policies in multilingual societies are political outcomes that emerge out of the interplay between ethnic competition and rivalry, national cohesion, and ethnolinguistic vitality of linguistic minorities. I argue that these three factors are primarily reflected by relative group size and interaction of language divide with other social cleavages. Specifically, I contend that these two variables shape language policy outcome by impacting group capability for mobilization and coalition building patterns. In turn, I claim that the most restrictive policy option, defined by exclusion of minority language from public sphere, and the most accommodative policy option, promotion of minority language by state, contribute to outbreak of ethnic conflict along linguistic lines. But middle-ground policies based on toleration of use of minority language in public sphere and providing support for it has the potential to defuse the tensions over language policy and contribute to prevention of conflict breaking out. I test these propositions on a cross-national dataset of minority language policy that covers 424 linguistic minority groups from 50 randomly selected countries. Results provide robust empirical support for the theory.