This paper aims to develop a fuller understanding of the relationship between the ethnic composition of childhood residential neighbourhoods, schools, and residential neighbourhoods later in life in producing and reproducing segregation. We apply a longitudinal research design on linked individual-level data from Estonia. Estonia is an interesting case because of the Soviet era population distribution policies and its ubiquitous state-funded educational system where minority parents can choose in which school—Russian-language or Estonian-language—their children study. We find that minority parents mostly opt for minority-dense schools and, if they do so, their children who grew up in minority-dense neighbourhoods also end up living in minority-dense neighbourhoods as adults. An inter-generational vicious circle of segregation forms. However, minority children who live in minority-dense neighbourhoods but study in majority-dense schools are more likely to end up living in majority-dense neighbourhoods later in life. Hence, intervening in school choice has the potential to contribute to inter-generational residential desegregation.