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Previous research on the integration of immigrants highlights a significant yet often overlooked gap in the perception of discrimination, whereby immigrants and ethnic minorities report considerably higher levels of discrimination, while the majority population severely underestimates the extent of discrimination experienced by these groups. This, in turn, may lead to additional conflicts as these minority groups feel marginalized and majority groups refrain from supporting measures aimed at reducing inequality. This paper makes a novel contribution to the literature on perceptions of discrimination by highlighting this often-overlooked gap and systematically examining its underlying determinants. Empirically, we utilize a unique and fine-grained geo-coded panel survey situated in Germany that oversamples immigrants from predominantly Islamic countries – groups that are particularly prone to experiencing discrimination. The results show that immigrants perceive higher levels of harassment and violence toward ethnic minorities than non-immigrants, while this gap is largely explained by their differential experiences with discrimination. Results from longitudinal two-way fixed effects panel models demonstrate that sustained and meaningful contact between immigrants and non-immigrants significantly reduces perceptions that intergroup relations are conflictual for both immigrants and non-immigrants. In addition, an increase in physical and social disorder increases conflict perceptions. These findings have important implications for place-based approaches to immigrant integration and policy measures that are aimed at enhancing social cohesion.