This article investigates the complex interrelation between ethnic and gender diversity,process and performance among groups of business students. The article is based on anempirical survey of business students working on a complex assignment in groups of two tofive in a small Swedish university. The results indicate that gender diversity leads to positivegroup outcomes, while ethnic diversity appears to create negative group outcomes.Intervening process variables, such as group communication, conflict and effectiveness inproblem solving, were not found to be influenced by diversity, or to influence groupoutcomes. While the non-influence of intervening variables can probably be explained bymethodological difficulties, the negative outcome for ethnic diversity indicates a need to helpstudents better manage ethnic diversity in order to reap its benefits.