A diverse ethnic context and an increasing immigrant youth population will soon become the reality across the entire u.S. Demographic landscape. Research has suggested that a multicultural context positively influences ethnic minority and immigrant youth by fostering ethnic identity and psychosocial development. However, it is unknown whether and how perceived multiculturalism can affect positive youth outcomes such as life satisfaction and subjective happiness. This study explored perceived school multiculturalism among 338 ethnic minority and immigrant youth, and found a positive relation between perceived school multiculturalism and subjective happiness with full mediation by ethnocultural empathy for african americans, asians, males, and females. Although school multiculturalism was also predictive of ethnocultural empathy for hispanics, ethnocultural empathy in turn, was not significantly predictive of subjective happiness. Taken together, these results suggest that one way to facilitate psychological growth and flourishing among ethnic minority youth is to encourage multiculturalism in school settings. 2009 American psychological association.