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Homophily, the tendency for individuals to associate with similar others, is a central principle in social science. Most research specifies the predicates homophily analysis a priori, rather than directly examining which attributes are salient to the individuals who form and maintain social ties. Consequently, little is known about the extent to which individuals expect homophily in their social networks. We investigate individuals' expectations of homophily—what we term cognitive homophily—and compare these expectations to the actual homophily observed in their social networks. We examine a dataset of 10,072 adults across 82 rural villages in Honduras that contains structured interviews that elicit individual beliefs about the existence of social ties in social networks, in conjunction with sociocentric ground-truth networks. Our findings reveal that individuals substantially overestimate the level of homophily for socially visible attributes such as wealth, indigenous ethnicity, gender, and religion. Conversely, this overestimation does not occur for less visible attributes like personality traits. Additionally, we find that beliefs about network ties are only partially explained by homophily based on individuals’ attributes; survey respondents also independently exhibit sensitivity to network structure, for example, demonstrating greater accuracy in judging strong ties. These results point to both the importance and limits of perceived social similarity in how individuals conceptualize their social networks. Understanding cognitive homophily enhances theoretical models of network formation, has implications for interventions aiming to influence social behavior and information diffusion, and is a potentially important foundation for understanding the interaction between homophily and inequality in social networks.