An experiment tested the hypothesis that the mere categorization of people into social groups spontaneously instigates a mechanism through which group-relevant information is perceived and processed in a biased manner. This in turn may result in the erroneous perception of correlation between group and behavior. Subjects were initially assigned to be members of a minority group, a majority group, or were not assigned to a group. They were then presented with a series of statements that described members of the two groups performing either desirable or undesirable behaviors. Results showed that unaffiliated subjects perceived an illusory group-behavior correlation, indicating the operation of a cognitive bias to associate the minority group with distinctive behaviors. Subjects who were themselves members of the observed groups perceived illusory correlations that favored their own group, indicating a very different sort of bias. The results suggest that a categorization-based ingroup favoritism guided the manner in which group information was processed. These data lend support to the contention that social categorization spontaneously instigates specific cognitive mechanisms that contribute to group stereotype formation.