ABSTRACT: In many cities, public housing has come to exemplify concentrated urban poverty and the social problems associated with it. One major policy response to addressing these problems is the demolition and redevelopment of public housing complexes as mixed-income communities. Several theoretical propositions that lie behind this policy are based on assumptions about the ways in which living among higher-income residents can lead to relationships and interactions that may benefit poor people. Based on in-depth qualitative research in two mixed-income developments in Chicago, this paper explores the dynamics of social interaction in an effort to better understand the processes and factors that influence such interaction on the ground, the differential experience of residents from different backgrounds, and the factors that contribute to their decision-making about and interpretation of social relations with their neighbors. This analysis helps to better interpret the findings of earlier studies and craft more informed expectations about such interactions and their likely effects.