Much cultural variation in humans is structured by ethnic identity, which entails perceptions of covariance between easily observable markers, difficult to observe norms, and, often, (potentially mythical) ancestry. The dynamics of ethnic identity involve changes in the distributions of these perceptions in a population over time. This chapter synthesizes work in the fields of anthropology, psychology, sociology, and economics on the relationship between ethnicity and cultural evolution, examining concepts such as ethnic markers and boundaries, cultural norms, essentialism, correlative and complementary coordination, and cross-cultural competence. We explore (i) the scope of ethnicity, and the challenge of how to distinguish it from other identity labels, (ii) the adaptive nature of ethnic psychology, (iii) the dynamics of ethnic perceptions, relating both to changes in the perceptions of an individual’s ethnicity, and changes in the perceptions of what a particular ethnic identity entails, (iv) consequences of ethnicity for other cultural dynamics, and (v) challenges for future research.