Recent advances in social neuroscience research have unveiled the neurophysiological correlates of race and intergroup processing. However, little is known about the neural mechanisms underlying intergroup empathy. Combining event-related fMRI with measurements of pupil dilation as an index of autonomic reactivity, we explored how race and group membership affect empathy-related responses. White and Black subjects were presented with video clips depicting white, black, and unfamiliar violet-skinned hands being either painfully penetrated by a syringe or being touched by a Q-tip. Both hemodynamic activity within areas known to be involved in the processing of first and third-person emotional experiences of pain, i.e., bilateral anterior insula, and autonomic reactivity were greater for the pain experienced by own-race compared to that of other-race and violet models. Interestingly, greater implicit racial bias predicted increased activity within the left anterior insula during the observation of own-race pain relative to other-race pain. Our findings highlight the close link between group-based segregation and empathic processing. Moreover, they demonstrate the relative influence of culturally acquired implicit attitudes and perceived similarity/familiarity with the target in shaping emotional responses to others' physical pain. Hum Brain Mapp 34:3168–3181, 2013. © 2012 Wiley Periodicals, Inc.