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The reactive ethnicity concept within the Segmented Assimilation Theory assumes a sequence where experiencing discrimination motivates immigrants to change their identity and the way they think about the receiving society. This requires a temporal order in which discrimination occurs first and the identity reassessment follows. Logically, this makes sense, but the opposite may also be true, much like the famous causal sequence problem affecting the intergroup contact theory research. With the goal of increasing our understanding of boundary creation between immigrants and citizens, the current study tests the process this using panel data from the Recent Immigration Processes and Early Integration Trajectories in Germany (ENTRA) survey and a differences-in-differences regression approach. Results confirm the reactive ethnicity sequence assumed in previous work. Those experiencing discrimination between the survey waves exhibit a significant increase in German identity rejection, suggesting that the hostile experience caused a change in how they view their self and the receiving society. Those avoiding discrimination grow warmer toward Germany, indicating that the absence of hostility leads to greater identification with the receiving society. The findings have implications for how we interpret decades of cross-section reactive ethnicity research.