The main purpose of this study was to investigate whether neighborhood ethnic diversity moderated the association between ethnicity and psychological distress in the four largest cities of Netherlands. Multilevel linear regression analysis was used to assess whether the association between ethnicity and psychological distress differed by levels of neighborhood ethnic diversity. Results showed that the Turkish and Moroccan residents reported significantly higher psychological distress than native Dutch and Surinamese residents. In high ethnic diverse neighborhoods Turkish residents reported significantly less psychological distress than in low ethnic diverse neighborhoods. Ethnic diversity amplifies the risk of depression for some but not all ethnic minorities.