Adults and children seem to essentialize certain social categories. Three studies investigated whether, and how, exposure to ethnic diversity affects this bias. Participants were 516 kindergarten, 2nd grade, and 6th grade Israeli Jewish and Arab children attending regular (mono-cultural) or integrated schools. Study 1 revealed that exposure increased the salience of ethnicity, especially for Jewish children. Study 2 showed no differences among groups at kindergarten regarding the relevance of recalling a story character's ethnicity, but by 2nd grade, Jewish children attending integrated schools were the most likely to mention such information. Finally, Study 3 revealed that while all kindergarteners started off at a similar level of essentialism towards ethnicity, exposure affected Arab, but especially Jewish, children's essentialist beliefs. Moreover, there were negative correlations between the salience of and essentialism towards ethnicity. Thus, interethnic exposure alleviated children's essentialist bias towards ethnicity and did so via making children aware of, rather than blind to, ethnic categories.