1986 saw the 20th annual Festival. Twenty years previously, the Smithsonian's 1967 Festival of American Folklife had announced in a national forum that study and conservation of living traditional cultures were a continuing part of the Federal government's engagement with arts, humanities, and science. Since that time, this idea has resonated outside the Institution in a way that helped to shape a coordinated Federal approach to traditional cultures.

1986 marked as well the 10th anniversary of the American Folklife Center in the Library of Congress, on whose board the Secretary of the Smithsonian sits as an ex-officio member. In his remarks for the Festival Program Book, Secretary Robert McC. Adams took note that the Smithsonian had collaborated with the Center on several folklife matters, among them the Federal Cylinder Project, which preserved and was actively making available to Indian communities the earliest sound recordings of American Indian music. He offered his congratulations to the American Folklife Center and also to the Folk Arts Program at the National Endowment for the Arts, in its 14th year in 1986, for their continuing good work.

The 1986 Festival featured four thematic programs and a series of musical performance celebrating the Festival's 20th anniversary. The 1986 Program Book included schedules and participant lists for each program; the Program Book essays provided a larger context for the Festival presentations, without being limited to traditions actually presented at the 1986 Festival.

The 1986 Festival took place for two five-day weeks (June 25-29 and July 2-6) between Madison Drive and Jefferson Drive and between 10th Street and 14th Street, south of the National Museum of American History and the National Museum of Natural History. A visual highlight of the 1986 Festival site was a large flooded rice paddy in the Japan program, where daily rice- transplanting rituals were enacted. The Festival was co-presented by the Smithsonian Institution and National Park Service and organized by the Office of Folklife Programs.