without its own nation state. However, the Iraqi Kurdish population has been striving to establish its own political order for more than two decades and, in northern Iraq, a markedly developed de facto state has emerged. Iraqi Kurdistan has established a considerable degree of autonomy and domestic sovereignty, which is particularly impressive considering the current state of its parent state Iraq. This success is puzzling, when considered alongside the most prominent theory of state formation, which argues that it is war that makes states. War does not explain the Kurdish state-making process. Rather, it has been a major setback for the Iraqi Kurds after 1991. This suggests an alternative theory of state formation, which argues that social coalitions of key elites can account for successful state-building. This article argues that the social coalition of the Kurdistan Democratic Party (KDP) and Patriotic Union of Kurdistan (PUK), which sustained state-building in northern Iraq, emerged and stabilized because of external incentives. Demonstrating unity in front of the international community, and particularly in front of Iraqi Kurdistan’s main sponsors, the US and Turkey, has resulted in large flows of revenue for the two parties. The case of Iraqi Kurdistan, therefore, allows for conclusions both on the potential and on the limitations of externally-promoted state-building coalitions. These insights are also relevant for debates on international state-building.