Past research indicates that diversity at the level of larger geographic units (e.g., counties) is linked to white racial hostility. However, research has not addressed whether diverse local contexts may strengthen or weaken the relationship between racial stereotypes and policy attitudes. In a statewide opinion survey, we find that black-white racial diversity at the zip-code level strengthens the connection between racial stereotypes and race-related policy attitudes among whites. Moreover, this effect is most pronounced among low self-monitors, individuals who are relatively immune to the effects of egalitarian social norms likely to develop within a racially diverse local area. We find that this racializing effect is most evident for stereotypes (e.g., African Americans are “violent”) that are “relevant” to a given policy (e.g., capital punishment). Our findings lend nuance to research on the political effects of racial attitudes and confirm the racializing political effects of diverse residential settings on white Americans.