How is negative reciprocity cultivated in an environment of violent conflict? This study investigates how students in the West Bank react to unfair proposals in an ultimatum game. Proposals submitted with Hebrew as compared to Arab handwriting are rejected more often. Israelis must offer 15 percent more of a given stake than Palestinians in order to achieve the same probability of acceptance. This willingness to lose money by rejecting proposals reveals a preference for discrimination against Israelis, cultivated in the conflict-ridden environment. Students who voice a militant attitude, surprisingly, do not reveal a higher tendency to discriminate, exercising a high degree of negative reciprocity toward all unfair proposals. But those who favor a political role for Islam have a higher inclination to discriminate. This implies that ethnic and religious cleavages do not consistently generate in-group solidarity.