This study shows that living in a better area reduces the risk of adverse pregnancy outcomes but, among African-American women, living in an area in which they are in a racial minority may increase the risk. Using the 1991 cohort of single infants born to African-American women in Chicago, we measured census tract socioeconomic status and defined women as having "positive income incongruity" if they lived in wealthier tracts than the average African-American woman of comparable education and marital status. We examined whether or not the effect of positive income incongruity differed according to whether or not African-American women lived in predominantly black, or mixed tracts. Among the women living in predominantly black census tracts, positive income incongruity was associated with a lower risk of low birth weight (odds ratio (OR)=0.91) and preterm delivery (OR=0.83). These effects were modest, but statistically significant for gestation (p-value=0.01). In contrast, among the women living in mixed tracts positive income incongruity was not associated with low birth weight (OR=1.04) or preterm delivery (OR=1.11). In mixed areas the expected benefits of positive income incongruity are completely offset by the racial density effect, suggesting that the positive effects of a better socioeconomic context may be countered for minority women by the adverse effects of racism or racial stigma.