In five experiments, we established and explored the contrast diversity effect--the effect of diversity of negative evidence on inductive inferences drawn from a single observation of a target exemplar. In Experiments 1 through 3, we show that increasing the diversity of negative evidence in a contrasting category led people to infer that a target exemplar corresponded to a higher level category and led to greater generalization of a novel property associated with the target. Further, we demonstrated two boundary conditions in which the effect only occurred when the negative evidence was consistent with a higher level category that both united the contrast exemplars and distinguished them from the target (Experiment 4) and when the negative evidence and the target shared an obvious parent category (Experiment 5). Taken together, these findings demonstrate that increasing the diversity of negative evidence alone increases generalization from a target so long as the negative evidence is drawn from a single contrast category that excludes, but shares a common parent with, the target. Implications for general theories of induction are discussed.