The international community's top envoy to Bosnia, Lord Ashdown, has ordered the reunification of the city, Mostar.
Lord Ashdown has sweeping powers to implement change
The former British politician imposed the decision despite the opposition of local politicians.
Mostar has been divided between a Croat-run western half and a Muslim-run eastern half, since fighting broke out between the two sides in 1993.
Lord Ashdown said a new council would be set up to prevent any ethnic group dominating the city.
"It is necessary get much-needed investment into the city... and to resolve the widespread destabilising effect of a divided Mostar on Bosnia as a whole," said Lord Ashdown, announcing the proposed changes.
Lord Ashdown has sweeping powers to impose legislation and to sack politicians viewed as being obstructive.
The new city-wide council should be in place after local elections in October.
The Muslim and Croat-run bodies which currently control the city on either side of the river will be abolished, and a single council with 35 members will replace them.
It will have equal numbers of Croat and Muslim members, with Serbs and the city's other ethnic groups also represented.
Lord Ashdown has criticised the city's two main ethnically-based parties, the Croat
Democratic Union (HDZ), and the Muslim Party of Democratic Action (SDA), for failing to agree on reunification.
The European Union has set the unification of Mostar as one of the pre-conditions for Bosnia to start negotiations for an association agreement with the EU later this year.
Such an agreement could lead to eventual fully-fledged membership.
Apart from its ethnic divide, Mostar has been best known for its 16th Century bridge which was destroyed by fighting in 1993.
It is due to be reopened in July, after a reconstruction project sponsored by Unesco, the United Nations cultural agency.
Lord Ashdown used the symbolism of the bridge to promote his plan for the city.
"I am, if you like, putting in place the keystone to the
political bridge that will reunite the city of Mostar on the basis of guaranteed power sharing," he said.
Despite the opposition of many in the nationalist political parties, a recent opinion poll suggested an overwhelming majority of Mostar's residents were in favour of uniting the city.
73% of 1,200 people surveyed by Partner polling agency said they supported the idea of a unified city - 82% said no single ethnic group should rule alone.