This article examines how different levels of internal organization are reflected in the residential patterns of different population groups. In this case, the Haredi community comprises sects and sub‐sects, whose communal identity plays a central role in everyday life and spatial organization. The residential preferences of Haredi individuals are strongly influenced by the need to live among ‘friends’ — that is, other members of the same sub‐sect. This article explores the dynamics of residential patterns in two of Jerusalem's Haredi neighbourhoods: Ramat Shlomo, a new neighbourhood on the urban periphery, and Sanhedria, an old yet attractive inner‐city neighbourhood. We reveal two segregation mechanisms: the first is top‐down determination of residence, found in relatively new neighbourhoods that are planned, built and populated with the intense involvement of community leaders; the second is the bottom‐up emergence of residential patterns typical of inner‐city neighbourhoods that have gradually developed over time.