Although immigrant group size has long been hypothesized to exert negative effects on majority members’ preferences for residential and educational settings, empirical research on this topic remains sparse. One plausible reason for this gap in the literature are the methodological and substantive complexities created by the strong association between immigrant group size and further correlates of preferences, e.g. neighbourhood SES or quality of education. In this study, we use factorial survey methodology to address this problem. In two within-subjects experiments conducted over the internet, N = 1032 German participants evaluated schools or residential areas with different levels of immigrant group size. In the vignettes describing schools and areas, we additionally varied factors that are thought to be ecologically related to immigrant group size (i.e., neighbourhood quality and crime in residential areas, and quality of education at schools). At the person level, we measured intergroup contact and prejudice and used these variables to predict the level 1 effect of immigrant group size on segregation preferences. We estimated a two-level random coefficients model with latent variables to explain preferences. The results show that immigrant group size had negative effects on evaluations of schools and residential areas, over and above the effects of infrastructure, crime, or quality of education. Furthermore, results indicate that intergroup contact reduced bias against diverse schools or residential areas, mediated by prejudice.