This article re-examines Herder's status as one of the founders of nationalism in the light of both older and more recent literature. The article focuses specifically on Herder's position with regard to the classical nationalist thesis that state and nationality should be coterminous. It argues that a close reading of Herder's oft cited and most explicit statement apparently lending support to this thesis has been misunderstood. The existing literature underestimates Herder's concern regarding the question of governance. For Herder there can be no case for statehood without just governance. As earlier drafts of his work confirm, Herder was deeply critical of the states he knew and denounced their overly bureaucratic and despotic character. He thought that nations could and should exist without being states. Depending on the circumstances, however, states might fulfil temporary functions to strengthen and preserve the national character, that most essential attribute of every nation. For Herder the diversity of nations is an insurance against despotism. It is not a licence for the creation of states.