Colonialism left numerous borders in its wake that subsequently became contested. These colonial borders have often been discussed as artificial, dividing communities, people or ethnicities that otherwise would belong together. Such an interpretation of colonial borders, I argue in this article, overlooks another important aspect of colonial boundaries: their role in creating nations as ‘imagined communities’ who in making reference to such borders can lay claim to a distinct national identity. While such an identity can be exclusionary and trigger conflict, it can also have a much more positive and ultimately hybrid function. I use the case of Italian colonialism in the Horn of Africa to demonstrate these multiple roles colonial boundaries can occupy and focus specifically on the creation and contestations of the borders of Eritrea. I argue that the acceptance of borders as markers of identity can be a prerequisite for finding innovative ways to overcome exclusions in the everyday lives of borderland groups. Thus, the example of Eritrea could hold wider lessons for addressing postcolonial disputes about borders and boundaries, if institutional arrangements are put in place that allow fluidity in everyday encounters.