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Why did Thailand and the Philippines adopt different policies toward their domestic Muslim minorities in southern border areas during the early 20th century? This paper addresses the above question by focusing on a critical but underappreciated external factor: the national elites' relationship with colonial powers in the process of modern state formation. I argue that whether the national elites develop an antagonistic or a collaborationist relationship with colonial powers has a great effect on government policies toward ethnic minorities. Elites' political autonomy and their strategic orientation, as two mechanisms connecting this external factor to domestic ethnic policy, are identified in this comparative case study of Thailand and the Philippines. Thailand's assimilationist policy toward Malay Muslims (1910-1944) originated in its antagonistic relationship with Britain and France since the 1880s, because it contributed to a high degree of Thai elite autonomy and to the elites' serious security concerns on nation-building. By contrast, the Philippines' accommodationist policy toward Moro Muslims (1921-1941) resulted from its collaborationist relationship with the American colonial power, and such a relationship took effect by limiting the autonomy of Philippine elites and shaping their economic concerns on nation-building. This controlled comparison shows why and how an external factor contributes to the origin of domestic ethnic policy. It deepens our understanding of nation-building practices in Southeast Asia, as well as the dynamics of inter-ethnic relations and ethnic conflict in this region after World War II. [ABSTRACT FROM AUTHOR]