This article presents a critical review of Social Identity Theory. Its major contributions to the study of intergroup relations are discussed, focusing on its powerful explanations of such phenomena as ingroup bias, responses of subordinate groups to their unequal status position, and intragroup homogeneity and stereotyping. In addition, its stimulative role for theoretical elaborations of the Contact Hypothesis as a strategy for improving intergroup attitudes is noted. Then five issues which have proved problematic for Social Identity Theory are identified: the relationship between group identification and ingroup bias; the self-esteem hypothesis; positive – negative asymmetry in intergroup discrimination; the effects of intergroup similarity; and the choice of identity strategies by low-status groups. In a third section a future research agenda for the theory is sketched out, with five lines of enquiry noted as being particularly promising: expanding the concept of social identity; predicting comparison choice in intergroup settings; incorporating affect into the theory; managing social identities in multicultural settings; and integrating implicit and explicit processes. The article concludes with some remarks on the potential applications of social identity principles. Copyright © 2000 John Wiley & Sons, Ltd.