This article examines how government policies affect ethnic relations by comparing outcomes across two nearby districts, one in Kenya and one in Tanzania, using colonial-era boundary placement as a "natural experiment." Despite similar geography and historical legacies, governments in Kenya and Tanzania have followed radically different language, education, and local institutional policies, with Tanzania consistently pursuing more serious nation building. The evidence suggests that nation building has allowed diverse communities in rural Tanzania to achieve considerably better local public goods outcomes than diverse communities in Kenya. To illustrate, while Kenyan communities at mean levels of diversity have 25 percent less local school funding than homogeneous communities on average, the comparable figure in the Tanzanian district is near zero. The Kenya-Tanzania comparison provides empirical evidence that serious reforms can ameliorate social divisions and suggests that nation-building should take a place on policy agendas, especially in Africa.