Among the newly emerged “democracies” during the "Third Wave of Democratization" in East Asia, Indonesia is a typical case study of the process of transition and consolidation of democracy founded on a multi-ethnic and multi-religious society grappling with deep cleavages. After President Suharto's resignation in 1998, the country was confronted with major challenges in its economy and politics, as well as the prospect of the democratization process. The question is ‘what role do political institutions play in the transition period and consolidation of democracy in Indonesia’? The article explores the relationship between the democratization process in the country, mainly in the post- Suharto period, and the institution of the party system. Thereby, the author points out the impacts of the democratization process on the party system, leading to the transformation of the party system in a particular tendency, as well as examines the role of the party system to the democratization process. Research shows that the Indonesian party system maintains a relative level of stability and institutionalization, playing a positive role in the transition and consolidation of democracy after Suharto.Among the newly emerged “democracies” during the "Third Wave of Democratization" in East Asia, Indonesia is a typical case study of the process of transition and consolidation of democracy founded on a multi-ethnic and multi-religious society grappling with deep cleavages. After President Suharto's resignation in 1998, the country was confronted with major challenges in its economy and politics, as well as the prospect of the democratization process. The question is ‘what role do political institutions play in the transition period and consolidation of democracy in Indonesia’? The article explores the relationship between the democratization process in the country, mainly in the post- Suharto period, and the institution of the party system. Thereby, the author points out the impacts of the democratization process on the party system, leading to the transformation of the party system in a particular tendency, as well as examines the role of the party system to the democratization process. Research shows that the Indonesian party system maintains a relative level of stability and institutionalization, playing a positive role in the transition and consolidation of democracy after Suharto.