Organized encounters between Arab and Jewish students as a means of education for coexistence are questioned vis-à-vis the recent politicization of Arabs who are Israeli citizens, and the subsequent shift in their self-identity from “Israeli Arabs” to Palestinians. A survey of 268 seventh grade Arab students in seven segregated and mixed Jewish-Arab communities reveals that their perceptions of Jews and of their own deprivation are determined by their political self-identity rather than by earlier contact with Jews. These perceptions further influence their readiness to associate with Jewish children. Concluding that the contact hypothesis may not enhance interethnic relations in situations of political conflict, we suggest that the school system shift its focus from students' encounters to curricular programs dealing directly with the conflict issues.