Identity has become an influential concept in politics for explaining the dynamics and problems of new world order. Despite its wide ranging usage in social sciences, we are still far away from a common understanding of identity. Different theoretical approaches developed by different academic disciplines extend the content of identity and increase the contention on it. In this paper, I try to explain the dynamic nature of identity, in particular of collective identity, using social capital concept as an explanatory factor. Instead of ascribing stable identities to individuals, social capital components like generalized trust, social networks and associational memberships can help us to show how one’s identification is affected by social practices. Toward this goal European identity has been selected as a case of analysis. The complex relationship between highly politicized national identities and a still-developing European identity presents an interesting area of study and social capital – which can be defined broadly as values created via social relationships and social groups, seems to be promising for its applicability to the operation of national and European identification. European level surveys were used to confirm this relationship empirically. This bottom-up perspective has expanded the knowledge on collective identity formation, which can be summarized as identities, at least at the collective level, are not fixed but constantly fluctuate and change by the nature of social dynamics.