Empowerment research has made important contributions toward understanding youth development, well‐being, and activism; however, it has failed to consider the impact that ethnic identity has on psychological empowerment (PE) and among related empowerment predictors (e.g., community participation and neighborhood sense of community [SOC]). The present study focuses on examining the mediating role of ethnic identity between community participation, neighborhood SOC, and PE. Using structural equation modeling path analysis techniques among a sample of Hispanic and Black youth (N = 1,480) from an underresourced community, this study examines the mediating role of ethnic identity between community participation, neighborhood SOC, and PE. Community participation and neighborhood SOC had a positive direct effect on both ethnic identity and PE. Both community participation and neighborhood SOC also indirectly affected PE through ethnic identity. This study supports the mediating role of ethnic identity and the direct effect of ethnic identity on PE. Results point toward the importance of ethnic identity with PE and in the empowerment process. Implications and directions for future research are discussed.