Finland has been known for its excellent PISA results in educational outcomes throughout the last decade. The country has boasted a rare combination of high overall level, as well as uniquely good outcomes of the bottom performers. However, the latest PISA results and the recent socio-spatial developments within the Finnish cities challenge this nationally celebrated balance in schools and urban social structure. Until now, research evidence has demonstrated that in the Finnish context with a powerful, universalist welfare state and a highly educated, homogenous population, differentiation increases mainly by the growth of an elite. Our analysis of large datasets from schools and neighbourhoods in Helsinki suggests that this development has been overturned in the local level: segregation has begun to increase and appears to operate through the trends of middle-class avoidance and the decline of the underprivileged groups in urban schools and neighbourhoods.