Research on residential diversification has mainly focused on its negative impacts upon community cohesion and positive effects on intergroup relations. However, these analyses ignore how neighbourhood identity can shape the consequences of diversification among residents. Elsewhere, research using the Applied Social Identity Approach (ASIA) has demonstrated the potential for neighbourhood identity to provide social and psychological resources to cope with challenges. The current paper proposes a novel model whereby these ‘Social Cure’ processes can enable residents to cope with the specific challenges of diversification. We present two studies in support of this model, each from the increasingly religiously desegregated society of post-conflict Northern Ireland. Analysis of the 2012 ‘Northern Ireland Life and Times’ survey shows that across Northern Ireland, neighbourhood identity impacts positively upon both wellbeing and intergroup attitudes via a reduction in intergroup anxiety. A second custom-designed survey of residents in a newly-mixed area of Belfast shows that neighbourhood identification predicts increased wellbeing, reduced intergroup anxiety and reduced prejudice, independently of group norms and experiences of contact. For political psychologists, our evidence suggests a reformulation of the fundamental question of ‘what effects does residential mixing have on neighbourhoods?’ to ‘how can neighbourhood communities support residents to collectively cope with contact?’.