Despite longstanding recognition that organisations are open systems that are affected by the broader environments in which they are situated, scholars have rarely examined how such macrosocietal conditions may influence processes and experiences within the workplace. Integrating research on selective incivility and mega-threats, we conceptualise the COVID-19 pandemic as a racial mega-threat and examine how this context may challenge organisations’ efforts to promote diversity and inclusion. Specifically, we predict that the protective benefits of diversity climate against incivility, an insidious form of modern discrimination incited by the COVID-19 pandemic, will be weaker for workers of Chinese descent compared to workers from other Asian subgroups, leading to more downstream negative outcomes for this group of workers (i.e., higher turnover intentions, poorer job performance and greater emotional exhaustion). This reflects the fact that workplaces are not impervious to the rising xenophobia toward China and Chinese people, who were particularly blamed and stigmatised for the emergence of this virus, as evident in North American society in early 2020. We found support for our predictions in a three-wave, time-separated study of Asian workers (N = 248) in the US and Canada during the first wave of the pandemic.