The present research examines the relation between perceived intergroup distinctiveness and positive intergroup differentiation. It was hypothesised that the distinctiveness–differentiation relation is a function of group identification. In two studies group distinctiveness was varied and level of identification was either measured (Study 1) or manipulated (Study 2). Results support the prediction that low group distinctiveness leads to more positive differentiation for high identifiers, although we found less support for the prediction that increased group distinctiveness leads to enhanced positive differentiation for low identifiers. The difference in emphasis between social identity theory and self-categorisation theory concerning the distinctiveness–differentiation relation is discussed and the importance of group identification as a critical factor of this relationship is stressed. Copyright © 2001 John Wiley & Sons, Ltd.