This study explores the relationship between ZIP Code-level racial diversity and individual well-being, particularly psychological richness, within the broader context of socio-ecological psychology. We conducted a large-scale survey in different U.S. ZIP Codes with varying levels of racial diversity, examining how community diversity correlates with individual psychological richness, happiness, and meaning. Although previous research suggests that increased diversity reduces happiness and meaning due to social fragmentation, our findings reveal a more nuanced dynamic. Contrary to our initial predictions of increased psychological richness, higher community diversity was associated with a slight decrease in psychological richness and meaning, and a significant decrease in happiness. Racial identity and socioeconomic context proved pivotal in moderating these effects, with white participants demonstrating an especially significant decline in happiness and high-income, majority communities showing a distinct decline in psychological richness. In this manner, this study replicates previous findings on happiness’s sensitivity to diversity and highlights how racial identity and resource access shape these outcomes. The results also indicate that communal diversity does not uniformly decrease well-being, as psychological richness and meaning demonstrate greater resilience to these communal stressors and some communities may benefit from diversity based on their degree of shared reality and communal trust. Our findings, therefore, underscore the need for further research into how direct social networks and personal relationships in diverse communities affect psychological richness, as the complex socioeconomic factors at the ZIP Code-level may obscure the benefits of diversity exposure.