Two group studies tested the mediating role of perceived diversity in the link between actual demographic composition and an individual’s identification with a small group. In these studies, a new type of dyadic perceived diversity—self-to-other perceived similarity—is introduced and measured. Further, a group actor partner interdependence model (GAPIM) approach was used to test mediation of the link between actual demographic composition and identification by perceived self-to-other similarity. In Study 1, 4- and 5-person small groups varying in gender composition interacted face-to-face. Results showed mediation of the effect of similarity in gender on group identification by self-to-other similarity. In Study 2, race and gender were experimentally manipulated by showing pictures of other group members with whom the participants expected to interact. Study 2 found evidence for mediation of the effect of gender similarity as well as effects of racial composition on identification by perceived self-to-other similarity. Complexities due to intersecting identities and levels of analysis inherent in psychological group research are discussed and future research directions are suggested.