This article is about decentralisation and social cohesion in religiously heterogeneous communities in times of political transition. Post‐Mubarak Egypt is taken as a case study involving the informal devolution of power in managing sectarian relations between the majority Muslim and minority Christian populations between February 2011 and June 2012. On the surface, the process had features of a political decentralisation of power which holds promise of downward accountability. The Supreme Council of the Armed Forces (SCAF) delegated the governance of local sectarian conflict to religious community leaders enjoying high popularity, a policy that was subsequently followed by the Muslim Brotherhood‐led government. However, the process of local leaders assuming the power to govern was also an unintended consequence of the collapse of rule of law in a context of extreme political volatility associated with a country in revolt.