Research on diversity in teams and organizations has revealed ambiguous results regarding the effects of group composition on workgroup performance. The categorization—elaboration model (van Knippenberg et al., 2004) accounts for this variety and proposes two different underlying processes. On the one hand diversity may bring about intergroup bias which leads to less group identification, which in turn is followed by more conflict and decreased workgroup performance. On the other hand, the information processing approach proposes positive effects of diversity because of a more elaborate processing of information brought about by a wider pool and variety of perspectives in more diverse groups. We propose that the former process is contingent on individual team members' beliefs that diversity is good or bad for achieving the team's aims. We predict that the relationship between subjective diversity and identification is more positive in ethnically diverse project teams when group members hold beliefs that are pro-diversity. Results of two longitudinal studies involving postgraduate students working in project teams confirm this hypothesis. Analyses further reveal that group identification is positively related to students' desire to stay in their groups and to their information elaboration. Finally, we found evidence for the expected moderated mediation model with indirect effects of subjective diversity on elaboration and the desire to stay, mediated through group identification, moderated by diversity beliefs.