This paper examines the interface between ethnicity and institutions, focusing on how ethnic structures are utilized by institutions to shape regulative representations and reinforce power dynamics. Ethnicity serves as a psychological foundation in this process, with institutions leveraging existing ethnic intuitions to organize and regulate social interactions. Drawing on naturalistic accounts of institutions and self-interest theory, the paper proposes a framework to understand how power asymmetries within institutions facilitate the exploitation of ethnic distinctions to achieve stability and maintain control over resources and cooperation. By integrating evolutionary, social, and cognitive perspectives, the analysis demonstrates how powerful self-interested actors shape institutional frameworks using ethnic distinctions to enforce normative rules. The paper concludes that the embedding of ethnicity in institutions is crucial for understanding institutional stability, efficacy, and their role in the dynamics of power and social categories.