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Abstract. The political problems which emerged in Estonia towards the end of the period of Soviet rule have been widely discussed in academic literature, together with descriptions of the deep structural problems believed to have contributed to ethnic mobilisation. Despite rigorous discussions (which have typically taken politico-historical perspectives) there is a lack of theoretical analysis of the Estonian case. This article argues that many aspects of ethnic grievances in Soviet Estonia bear a striking similarity to theoretical issues raised in discussions of internal colonialism, and applies these theories to elucidate the Soviet Estonian case study. The relationship between core and peripheral areas is examined first with particular reference to the creation of a cultural division of labour which has the potential to promote ethnic group formation. Alternative cultural divisions of labour (both hierarchical and segmental) within the periphery are then analysed and their importance in ethnic group formation and mobilisation via reactive and interactive mechanisms evaluated. After comparing these theoretical issues with the case study of Soviet Estonia, the article concludes that internal colonialism retains sufficient analytical insight to warrant further research, both on a theoretical basis and also in its application to societies which have experienced Soviet style development.