Some studies suggest that ethnic minority people are healthier when they live in areas with a higher concentration of people from their own ethnic group, a so-called ethnic density effect. To date, no studies have examined the ethnic density effect among indigenous peoples, for whom connections to land, patterns of settlement, and drivers of residential location may differ from ethnic minority populations.The present study analysed the Māori sample from the 2006/07 New Zealand Health Survey to examine the association between increased Māori ethnic density, area deprivation, health, and experiences of racial discrimination. Results of multilevel regressions showed that an increase in Māori ethnic density was associated with decreased odds of reporting poor self-rated health, doctor-diagnosed common mental disorders, and experienced racial discrimination. These associations were strengthened after adjusting for area deprivation, which was consistently associated with increased odds of reporting poor health and reports of racial discrimination. Our findings show that whereas ethnic density is protective of the health and exposure to racial discrimination of Māori, this effect is concealed by the detrimental effect of area deprivation, signalling that the benefits of ethnic density must be interpreted within the current socio-political context. This includes the institutional structures and racist practices that have created existing health and socioeconomic inequities in the first place, and maintain the unequal distribution of concentrated poverty in areas of high Māori density. Addressing poverty and the inequitable distribution of socioeconomic resources by ethnicity and place in New Zealand is vital to improving health and reducing inequalities. Given the racialised nature of access to goods, services, and opportunities within New Zealand society, this also requires a strong commitment to eliminating racism. Such commitment and action will allow the benefits potentially flowing from strong communities to be fully realised. © 2013 Elsevier Ltd.