In academic and organizational domains, performance measures are often used to assess achievement or aptitude. When certain groups of people systematically underperform on such measures, a common interpretation is that the groups differ in inherent ability. However, social psychological research over the past 15 years has documented a phenomenon called stereotype threat whereby subtle situational reminders of negative stereotypes can stifle the performance of those who are targeted by them. In this article, we review research aimed at understanding the sequence of cognitive and affective processes that underlie these situationally-induced performance impairments. We review evidence that being the target of negative stereotypes cues self-uncertainty and a physiological stress response, engages more explicit monitoring of one’s performance, and efforts to regulate unwanted negative thoughts and feelings. Alone or in concert, these extra-task processes hijack cognitive resources needed for successful performance. Armed with the knowledge of these mediating mechanisms, we then review evidence from both field and laboratory based research demonstrating that gender and racial gaps in achievement can be alleviated if not eliminated through creative and often subtle interventions that diffuse the pernicious effects that stereotypes can have.