The fundamental problem of a systematic sociological approach to the issue of “ethnic situations” and of this research may be summarised as the following question: how do the operations of social and psychological systems generate, maintain, and transform ethnic situations? In this paper, the problem is divided into several issues, all belonging to the domain of social epistemology: first, what is an observation point and in what way do ethnic groups transform into national minorities?; second, the sociological concept of a situation; third, observation and ethnic situation; fourth, mutual observation and identity construction; fifth, an external observer – the state; sixth, the EU as an external observer of the national state in an ethnic situation. Starting from Luhmann’s principle according to which a system is constructed and maintained through observation, using the processes of differentiation and signification, the paper pays special attention to the descriptions and self-descriptions of the observer (both within the situation and beyond), and their logical grouping in the systems of classification of human collectivities, discourses, world views and constructions of different identities. Such an approach is the source of the basic research programme (method) of a systematic approach, in which the mentioned transformations of ethnic groups are not a consequence of cultural differences between them, but arise from a cognitive process in which the observers produce differences by means of differentiation. The concepts in social sciences are first and foremost observational devices determining what we observe and how we do it. This research focusses on the mutual relationship between observers, observation and observation subjects (ethnic groups) within an ethnic situation. It is within the limits of epistemology of social sciences. The persuasiveness of a positivist vision of sociology, according to which the application of clearly defined methodological postulates ensures true understanding of the social world, has generally retreated in the face of a reasonable principle stating that every branch of sociology must consider the dialectics of internal and external observation. That is, the relationship between the meanings immanent in an observed community and the sociological insight, and the researcher’s (observer’s) prior knowledge that emerges from their life situation and their theory. Related to this issue is the obsolescence of the theory of knowledge that starts from differentiation between the concepts of opinion/being, knowledge/object, subject/object. Its place is partly occupied by the “constructivist naturalised epistemology” – a detranscendentalised epistemology that primarily deals with physical, biological, psychological and social conditions of knowledge. All subjects of observation are constructions. However, they are not mere fantasies, but have a foothold in the reality of the social situation in which science as a system of society is found together with the individual scientist/observer as a member of the “republic of scholars” (Berger and Kellner, 1991: 62). The concepts of ethnicity, ethnic group and national minorities discussed in the paper show the constructed nature of the so called sociological objects and their foundation in the situation. All of these concepts refer to the same object of observation – groups of people in a particular situation being observed. Consideration of the history of the social situation concept allows us to develop a reference framework for the ethnic situation. Concreteness, location, timing and the number of participants are the key elements of the reference framework serving as the starting point for the construction of a theoretical concept of ethnic situation. Due to required concreteness, the categories of space and time are essential: how the actors perceive them, how they share and organise them, what they do with them, how they use them to overlap, converge and coordinate their individual actions. A systematic sociological theory as an observer distinguishes between a social system (interactive and communicative) and its environment, i.e. the situation. Social system actors may be seen as individuals or collectivities. Aspects of a personality system also include ethnicity, so individuals may be seen as elements of (ethnic) social groups. During the process of mutual observation, individuals (ethnic groups) generate descriptions of other groups (labelling, typing, stereotyping) and self-descriptions. Due to different angles of observation, collective subuniverses of meaning are formed – mostly conflicting ones. The situation also includes second-level observers, the social systems which Luhmann refers to as organisations (e.g. the state, the European Union) or differentiated functional systems (science, school system, market, family). In a way, collective and individual actors possess awareness of the complexity of their ethnic situation and direct their actions accordingly. From their perspective, the situation can also be a resource for achieving the actor’s goals. Sociology can and should analyse the observers of ethnic situations – organisations and functional systems, by analysing the differentiation codes that second-level observes use in their observation. Looking from a third-level perspective, second-level observers are also part of the ethnic situation. By generating its sociological descriptions, sociology itself becomes part of the situation both for participants and for other observers. The notion that there is no dominant point of observation is essential to Luhmann’s observation paradigm. The functional differentiation of society causes the emergence of special observation devices: science, the state, mass media, art. Descriptions, discourses and world views arising from different observation points are organised and selected into topics. Anything can become a topic of communication in a situation. Descriptions and situations make up a structural union of the social system and environment. According to the double hermeneutic model, they operate as circular self-referential and hetero-referential structures – observation constructs the situation, while the situation constructs the observer. Objects of observation can only be understood as components of differentiation, not as something that is meaningful for itself. All distinctions lose their unquestionable self-evidentness and must be understood as contingent conditions of observation and signification. That means that society’s self-description can be redirected from the question of what to the question of how. In that case, the problem is not what society is, but how it is described, who describes it and by which distinctions. From the viewpoint of Luhmann’s definition of observation, it is evident that the ethnic situation results from the interplay between internal and external observations and definitions. The distinction between the internal and external definition enables the observation of an ethnic situation from several different points of view or levels of analysis. From the perspective of a second-level observer, science can construct and observe ethnic situations at the level of mutual presence in everyday life, at state level, at the level of state relations or globally at the level of supranational entities such as the European Union. The aim of such an approach is to show how micro-situations are transformed into macro ones and vice versa. Another research programme includes the observation of observers and their differentiation codes, descriptions, categorisation and classification systems. They allow for the understanding of mechanisms used by the observational devices wielding power to define the ethnic situations and processes through which the “micro-physics of power” is manifested in ethnic situations. From this follows Luhmann’s methodological instruction – observe the observers and their descriptions of a situation. The orientation and motivation of individuals within an “ethnic situation” is regulated by cognitive, affective and moral programmes of ethnic institutions. These programmes cause and deepen the divides separating them from other ethnic groups, thus consolidating their ethnic identity. Cognition programmes provide individuals with knowledge of themselves, knowledge of their own group, group heritage and history (which sometimes comes down to certain selected “aspects of the past”) as well as knowledge of the values of the individual’s group. The moral programme implies the existence of group commitments, for example the importance of learning the ethnic language, of passing on moral values to the descendants, endogamy and solidarity with members of one’s own ethnic group. The affective program of ethnic identity “covers” the feelings of attachment to a group. Therefore, it can be argued that institutions, especially ethnic ones, are the creators and guardians of knowledge needed by their members to survive as a group. Existing institutionalized internal definitions can provide defence against the imposition of external ones. The experience of categorisation and classification can strengthen the existing group identity by providing resistance, reactions and deepening the divides. The modern state is another external observer that influences the constitution of an ethnic situation. The state is an organisation holding legitimate power to observe, oversee, count, categorise and classify the population, and thus influence the formation of ethnic identities and the transformation of the ethnic situation. The modern ethnic situation, a complex configuration of ethnic group’s positions and relationships, is a result of operation of various state and ideological devices, wars and ethnic conflicts. However, today it differs in terms of qualitative features from the ethnic situations that had preceded it, and for two reasons. First, the ethnic situation took on its modern form of the “majority/minority” due to the emergence of national states. It does not come down to a mere numerical relationship, but to a relationship of power. The state definitely belongs to someone, it is somebody’s national state. The European Union as a third-level observer watches the national states. With its institutionalised procedures for observing and evaluating the activities of the observed, primarily the candidate countries, it strongly influences the changes of the ethnic situation by providing different definitions of it. Additionally, the European definition of a situation directly changes the understanding of the sovereignty of the national state, the configuration of power relationships between ethnic groups, and indirectly their identity. The very complexity of the European ethnic situation arises from a multiverse of these observational perspectives and descriptions. Western ideas, technology, forms of organisation of society and economy, ways of waging modern wars, ideologies, ideological devices of coercion, ideas and organisation of modern state administration with its methods of classifying, categorising and counting the population, observing and describing others and creating discourses about them – all of these have in a sense influenced the shaping and transformation of the European ethnic situation. A modern ethnic situation is a complex configuration of the position and relationship between ethnic groups and the state in the spatial-temporal context observed. The presented draft of the theory of observation, observers and ethnic situation serves as a possible approach to ethnic groups, nations and national minorities. Its validity can be determined if the interpretative capabilities of these complex phenomena are proven. If we agree that the world, especially modern, is not perceived by senses or by entering it to obtain data, but is always mediated by some means of transmission or dissemination medium, then the programme of observing the observer seems to make sense. An important epistemological question posed by the paper is the following: does starting from the notion of ethnic situation open a possibility of more theoretically based research and interpretation of ethnic relations?