Are the events in Ishbal based on or inspired by the Holocaust?
Hiromu Arakawa, the mangaka, states that she was not influenced greatly by any specific country, but rather a collection of European countries during the Industrial Revolution, as stated in the answers to this question, sourced back to an interview in Newtype USA, January 2006.

While I'm sure Arakawa took inspiration from her own country's history, too, the fact that she was inspired by Europe at all makes a convincing argument already.

With that said, I think it's fair to say that there is a decent amount of evidence specifically toward the extermination of Ishval being inspired by the Holocaust. In the question I linked above, there's a few other points that tie Amestris to Germany, but I think there's a few specific points to consider.

The leader of the time was labelled as a Fuhrer.

Not sure there's much more to say here. Hitler and Bradley share a title and a mustache.

During the flashbacks, the most prominent feature of the Amestrian army is their eyes.

It's quite clear that there is emphasis put on the non-Ishvalan Amestrians being very similar to the Aryan race that was dominant during the Holocaust.



Ishval differs from Amestris greatly in its religious views.

Aside from their ways of living being similar to those of the Amish, the largest difference between them and the "regular" Amestrians is the fact that they believe in the creator Ishval. In the Holocaust, Hitler's motivation was a duality of both targeting their bloodlines as well as their faith.

However, the Holocaust is a very sensitive topic.

I think part of the reason Arakawa denies being inspired by this is that she does not want to take a political stance on the issue. As soon as she admits to being inspired by such a sensitive issue, she opens herself up to all kinds of criticism and alienation from specific groups, mostly notably those of Jewish faith or descent.

Answer the question already! Was the Ishvalan Extermination inspired by the Holocaust?

There is no straight answer! Sorry! If you believe what Arakawa has said publicly, then no, it wasn't. She does not admit to taking inspiration from any particular country or event, just the feel of the European countries during the Industrial Revolution as well as the 20th century development.

However, if you'd rather look past the word of God, I think there is ample evidence to suggest that there were aspects of the Holocaust and WWII Germany that were imported into Fullmetal Alchemist, with Ishval and the Extermination being two of them.