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Theories of party system formation expect social divisions and electoral rules to shape the structure of party competition. Yet the context in which party systems emerge also shapes the preferences of voters and politicians, and the choices available to them. In Western Europe, many party systems emerged during democratization and state-building, a context which affected the political relevance of social identities and the permissiveness of electoral rules. Using examples from party system formation in the region, I discuss how the context in which party systems emerged shaped their structure. This paper contributes to research on party system formation by illustrating how context interacts with the social structure and electoral rules. It also contributes to the comparative historical analysis of political development by showing how context shapes the sequences of actors' actions during processes of institutional development.