Previous diversity research has neglected the role of psychological mechanisms that underlie the relationship between diversity climate and employee performance. Drawing on social and racial identity theories, we hypothesized that psychological safety mediates the relationship between diversity climate and employee performance. Furthermore, we proposed that race moderates both stages of the mediation, whereby the relationships between diversity climate and psychological safety and between psychological safety and performance are stronger for minorities than for Whites. Results, based on a survey of employees and their colleagues, revealed that the relationship between diversity climate and employee performance was mediated by psychological safety. We also found that the diversity climatepsychological safety and psychological safetyextra-role performance relationships were moderated by race, such that these relationships were stronger for minorities than for Whites. Further, the indirect effects of diversity climate on extra-role behaviours via psychological safety were also moderated by race, such that these relationships were stronger for minorities than for Whites. For efficient management of diversity in organizations, research and practical implications are also discussed.