The tenuous relationship between ethnic diversity and welfare solidarity has become a central focus in sociological and political inquiry. Yet, the question whether ethnic composition of the residential environment affects welfare chauvinism (favouring an encompassing welfare state that is preserved for ingroup members) has remained fundamentally unanswered. This article integrates extensive experimental data on welfare solidarity with hypothetical, unemployed persons from domestic and foreign origin among 23,015 native participants (to isolate welfare chauvinism), and detailed registry data (on the residential neighbourhood of these participants) from the Netherlands. This combination of contextual and experimental data allows us to test rivalling theoretical arguments on the relationship between ethnic diversity and welfare chauvinism, namely conflict, contact, and constrict theory. The outcomes of this enriched vignette survey experiment show that ethnic diversity has a specific and sizeable effect on welfare chauvinism under a range of model specifications. Diverse neighbourhoods drive down natives’ support for welfare distribution with migrants but not with natives. Ethnic diversity thereby stimulates the deservingness gap between natives and migrants, i.e., welfare chauvinism. We discuss the implications of these findings for conflict, contact, and constrict theory.