We investigate how the institutional context of the public and private sectors regulates the association of workplace diversity policies and relational status positions with first- and second-generation immigrants’ wages. Using unique linked employer–employee data combining administrative and survey information of 6,139 employees in 120 German workplaces, we estimate workplace fixed-effects regressions. Workplace processes are institutionally contingent: diversity policies such as mixed teams reduce inequalities in the public sector, and diversity policies such as language courses reinforce existing inequalities in the private sector. In public sector workplaces where natives hold higher relational positions, immigrants’ wages are lower. This group-related dynamic is not detectable in the private sector.