The “contact hypothesis” suggests that desegregation is good for the minority group members but the view has been challenged by the studies which describing a so-called “ethnic density effect”. This study examined the possibility of an “ethnic density effect” in the context of historical ethno-religious segregation in Northern Ireland. It was hypothesised that the “ethnic density effect” is not simply the result of structural variables, such as ethnic population mix at local community level, but also on individual perceptions of area based ethno-religious group density, perceptions of their local group status and their levels of in-group identification or solidarity. Data from 1000 randomly selected participants were tested for ethno-religious group invariance in the prediction of psychological adjustment, as measured by the General Health Questionnaire (GHQ-12). The results indicated a small direct “ethnic density effect” based on perceptions of religious mix at local level (p < .05). Ethno-religious differences were observed in the relationships between perceived ethnic density and perceived discrimination (p < .05). The “ethnic density effect” reported in some cultural contexts were evident in Northern Ireland and this has implications for policy makers concerned with community relations.