State elections in Germany’s multi-level polity have important implications for politics at both the regional and the federal level: state governments’ composition makes a difference for both policy outputs and the federal government’s political leeway. We provide novel insights into long-term trends in state elections, including aspects of voting behavior, party systems, and government formations, covering elections between 1946 and 2023. We argue that the commonly held belief that state parties try to avoid coalitions bridging the government-opposition divide at the federal level is dependent on the level of legislative party system fragmentation. Furthermore, we argue that fragmentation influences the formation likelihood of ‘grand coalitions’ between CDU/CSU and SPD. Using conditional logit models, we find empirical support for our theoretical arguments. We contribute to a deeper understanding of the complexities of Germany’s multi-level polity and emphasize the need to consider evolving voting behavior and party competition patterns in coalition analyses.