This article examines the implications of Latin America's recent wave of state-embraced multiculturalism for the region's indigenous peoples, arguing that state recognition of indigenous difference is not inevitably empowering for indigenous groups or transformative of nation-states. It utilises data from fieldwork with the Kuna Indians of eastern Panama in order to delineate more precisely the contexts and strategies of indigenous peoples which may serve to push outwards more constrained forms of institutional multiculturalism. It explores the links between Panama's historical nationalist project, contemporary state multiculturalism and ethnically specific forms of mobilisation for land rights and autonomy. It also examines the transformative potential of multiculturalism in the context of the simultaneous implementation of global economic and cultural projects of neoliberalism.