Scholars of electoral politics have long argued that the size of a party system is jointly determined by social diversity and district magnitude. However, no clear consensus exists regarding the best operationalization of the diversity of a society. Furthermore, the relationship between diversity and electoral rules, on one hand, and the effective number of parties, on the other hand, has never been tested at the level of the electoral district in a cross-national comparative context. This article aims to fill both holes and introduces the concept of cross-district diversity. I argue that the extent of cross-district diversity in a country exerts a substantial qualifying impact on the relationship between district-level diversity and the effective number of parties. Support for this finding emerges from a multilevel regression analysis that includes thousands of electoral districts in a diverse set of 29 democracies.