We link newly digitized personnel records of the U.S. government for 1907–1921 to census data to study the segregation of the civil service by race under President Woodrow Wilson. Using a difference-in-differences design around Wilson’s inauguration, we find that the introduction of employment segregation increased the black-white earnings gap by 3.4–6.9 percentage points. This increasing gap is driven by a reallocation of existing black civil servants to lower-paid positions, lowering their returns to education. Importantly, the negative effects extend beyond Wilson’s presidency. Using census data for 1900–1940, we show that segregation caused a relative decline in the home ownership rate of black civil servants. Moreover, by comparing children of black and white civil servants in adulthood, we provide suggestive evidence that descendants of black civil servants who were exposed to Wilson’s presidency exhibit lower levels of education, earnings, and social mobility. Our combined results thus document significant short- and long-run costs borne by minorities during a unique episode of state-sanctioned discrimination.