A growing literature identifies the external environment as a key driver of diversity management in frontline public services. With many public services spanning the public, nonprofit, and private sectors, the degree to which ownership moderates the link between the environment and diversity management practice is an important area that has received little attention. Using longitudinal data on nearly 4,000 American hospitals from 2008 to 2012, we explore how public, nonprofit, and private hospitals diverge in their responses to three environmental factors—market competition, inter-organizational collaboration, and the racial diversity of their local service area. Findings from random effects panel data models and panel logistic regressions suggest that these factors are associated with heterogeneous diversity management activities across different sectors. For public hospitals, diversity management is influenced by the racial diversity of clients. Nonprofit hospitals’ diversity management is influenced by both inter-organizational collaboration and racial diversity of clients. Market competition is the main driver of diversity management in the private sector. These findings bring insights from contingency theory and the cross-sector comparison literature into diversity management research. Key findings suggest there are complex and multiple mechanisms guiding diversity management practices across different sectors.