This article shows that indirect positive reciprocity triggered by experiencing short and superficial cooperation with outgroups' individual members reduces discrimination of other members of the same group. The field research combined a lab‐in‐the‐field experiment and a survey conducted in the slums of Mumbai, an Indian city notorious for Hindu‐Muslim violence. After the treatment manipulated expectations of cooperative behavior, ethnically heterogeneous groups produced as much public goods in a public goods game as homogeneous groups. This positive experience radically reduced Hindu subjects' discriminatory attitudes towards the Muslim minority after the experiment. The effect was equally strong among voters of two extremist parties implicated in ethnic riots. The survey compared reciprocity with alternative explanations of why people discriminate against some, but not other ethnic groups. Indirect positive reciprocity and intergroup contact are associated with less, and relative size of the outgroup with more discriminatory attitudes.