This article investigates the complex interrelation between ethnic and gender diversity, process and performance among groups of business students. The article is based on an empirical survey of business students working on a complex assignment in groups of two to five in a small Swedish university. The results indicate that gender diversity leads to positive group outcomes, while ethnic diversity appears to create negative group outcomes. Intervening process variables, such as group communication, conflict and effectiveness in problem solving, were not found to be influenced by diversity, or to influence group outcomes. While the non-influence of intervening variables can probably be explained by methodological difficulties, the negative outcome for ethnic diversity indicates a need to help students better manage ethnic diversity in order to reap its benefits. (Contains 4 tables.)