This study explores the associations of ethnicity and perceived challenge with high-school students' academic engagement and perceived competence in science. Data were collected through a variant of the Experience Sampling Method in which participants reported on their levels of engagement, perceived competence, and challenge while in science class, in response to signals from a vibrating pager. Hispanic and non-Hispanic White students reported similar levels of engagement in science, though non-Hispanic Whites reported higher levels of confidence. Results suggest that Hispanic and non-Hispanic White students respond differently to features of the learning environment. For example, while challenge was negatively associated with engagement in general, highly challenging science instruction had a less negative impact on Hispanic students' engagement, and a positive impact on their perceptions of competence relative to non-Hispanic White students. Findings highlight the importance of studying students' perceptions of their classroom learning experiences for understanding ethnicity gaps in STEM areas.