The reasons behind the attitudes of non-Aboriginal Australians toward Aboriginal Australians have not been examined empirically. Neither has the relationship between such attitudes and false beliefs about Aboriginal people and entitlements, and “political correctness”. Two random surveys were conducted in 1997 in a city location (Perth, Western Australia) and a country mining town (Kalgoorlie, Western Australia). Three major findings emerged. First, modern prejudice (a subtle form of prejudice with a veneer of egalitarianism) was more prevalent than old-fashioned prejudice (a blunt, segregationist form of prejudice) in both locations, although Kalgoorlie residents scored significantly higher than Perth residents on modern prejudice. Second, political correctness was predicted by prejudice, which related (directly or not) with age, education, political orientation, and false beliefs. Third, attitudes toward Aboriginal people served both a value-expressive function (to do with values and beliefs) and an experiential-schematic function (to do with personal experience). However, the latter function was more prevalent in Kalgoorlie compared to Perth. Overall, the results support previous findings regarding the declining prevalence of old-fashioned prejudice, but indicate that prejudice is still commonplace. Additionally, the findings — especially those concerning false beliefs — suggest that the public should be given more information about Aboriginal history and issues, and that other strategies be put into place to address the problem of prejudice within Australian society.