The present study aims to examine the impact of encounter between two different ethnic groups, Jews and Arabs, of Israeli first-year graduate students who study in four colleges of education, on the development of their intercultural competence: (1) knowledge regarding the "other," (2) change in attitudes and behavior towards the other, and (3) multicultural educational practice. The findings point to two clear factors affecting the development of intercultural competence: the formal and informal college experience as reported by respondents, particularly the contents and tools that both Jews and Arabs acquired at the college in addition to personal characteristics and off-campus encounters. The second factor is the difference between the experiences of Jewish and Arab students: while Arab students are more knowledgeable regarding the Jewish culture and are more willing to change attitudes and educational practices in light of multiculturalism, Jewish students are less prone to make such changes. Thus, according to our findings, intercultural encounters among educators during their graduate studies could create a unique opportunity to turn the college experience transformational in terms of intercultural competence, particularly in the segregated structure of Israeli society.