In the U.S. federal system, power is divided between a central government and a set of regional governments. A unitary system, by contrast, vests all authority in the central government. In the American context, federalism refers to the division of power between the national government on the one hand and the state and local governments on the other.Federalism is one of the two basic structural characteristics of the American constitutional system, the other being saparation od powers among branches of the national government. During the two centuries since the republic was founded, the relationship between the national government and the states has changed dramatically. Today, there is no question of the dominance of the national government in most areas of policy making. Yet states remain viable actors in the political system and in recent years may have become even more important. Thus, as a constitutional principle, federalism retains considerable vitality.As an applied principle of government, federalism requires an ongoing effort by legislators, president, and judges to balance many competing interests and values, among them: individual liberty and public order, local diversity and the national interest, limited government, and social justice. This article examines the constitutional basis and evolving meaning of federalism, giving special attention to the cases of the U.S. Supreme Court in defining the relationship and marking the boundaries between national and state functions.