Social identities enhance members' well-being through the provision of social support and feelings of collective efficacy as well as by acting as a basis for collective action. However, the precise mechanisms through which identification acts to enhance well-being can be complicated by stigmatisation, which potentially undermines solidarity and collective action. The present research examines a real-world stigmatised community group in order to investigate the following: (1) the community identity processes that act to enhance well-being and collective action and (2) the consequences of stigmatisation for these processes. Study 1 consisted of a household survey conducted in disadvantaged areas of Limerick city in Ireland. Participants (n = 322) completed measures of community identification, social support, collective efficacy, community action and psychological well-being. Mediation analysis indicated that perceptions of collective efficacy are an important mediator of the effect of identification upon well-being. However, levels of self-reported community action were low and unrelated to community identification. In Study 2, 14 follow-up multiple-participant interviews with residents and community group workers were thematically analysed, revealing high levels of stigmatisation, which was reported to lead to disengagement from identity-related collective action. These findings indicate the potential for stigma to reduce collective action through undermining solidarity and social support. Copyright © 2013 John Wiley & Sons, Ltd.