This study introduces the concept of micro-segregation as an alternative to ghettoization in order to understand residential patterns in historical Jewish communities. The process of ghetto formation is associated with the spatial separation of a minority group as a result of racial stigma and poverty. It operates at a large scale and posits that ghetto boundaries will be rigidly policed. By contrast, the process of micro-segregation is associated with the separation of a minority group as a result of marginalized legal status. It operates at a smaller scale and posits that the boundaries of ethnic communities are porous, offering sites of economic value. To assess the conceptual utility of micro-segregation, we apply it to four Jewish communities in the German states before the 20th century. Spatial analysis suggests that the communities varied in their degree of micro-segregation, but consistently offered economic opportunity at the boundaries of Christian and Jewish worlds.