Previous research claims that there is a significant relationship between party systems and democracy. Although party system institutionalization is seen as a necessity for democratic consolidation, the effects of different party system characteristics on democracy are sharply contested. This study contributes to this debate through a systematic analysis of the relationship between two party system characteristics (party fractionalization and party polarization) and level of democracy. It is found that party polarization is positively related to the level of democracy in a country, i.e. the higher level of party polarization can produce the higher level of democracy. It is found, however, that there is no significant relationship between party fractionalization and level of democracy in a country.