While most Germans reacted welcoming toward newly arrived refugees in 2015 and 2016, parallelly overt hateful reactions such as hate crimes, social exclusion, and increasing right-wing electoral support have been registered all over Germany with several regions emerging as “hot spots” in these regards. Among them was our case, the mid-sized town of Bautzen in the state of Saxony, where intergroup conflict and violent clashes between locals and refugees caused news headlines. To analyze intergroup conflicts in the ethnically super-homogenous context of Bautzen, we performed a qualitative interview study. More specifically, we conducted 48 semistructured interviews with residents and members of the victimized outgroup of refugees. Our analysis reveals that the societal basis of intergroup conflict in Bautzen seems to be a distinct climate of exclusion aimed at tagged outgroups. Refugees report facing everyday discriminatory practices and even violence. Further, this specific local climate is facilitated by several Bautzen-specific characteristics on the macro level, such as low number of foreigners and high levels of right-wing electoral support. Our findings suggest that limited diversity and widespread stereotypes affect locals’ reactions toward and perception of refugees. We discuss our results in light of the intergroup contact hypothesis and encourage more qualitative research on the nexus of intergroup contact and intergroup conflict.