This article introduces the conceptual distinctions between "mediated" and "immediate" Islamophobia. "Mediated" Islamophobia refers to the fact that most people who express Islamophobic sentiment do not know (m)any Muslims and know little about Islam; their knowledge about Islam and Muslims, and any Islamophobic sentiment they may have, come from the exposure to traditional and/or social media. Given the documented Islamophobic bias of many "Western" media, "mediated" Islamophobia may be on the rise. On the other hand, research has shown that what we call "immediate" Islamophobia is less of a problem: People who know Muslims personally, live close to them and are better informed about Islam, are less likely to be Islamophobic. This article uses empirical data to contribute to the discussion of immediate, face-to-face experiences of residents in two Muslim-concentration areas in Melbourne, Australia, with a reference to the "contact theory." We analyze residents' perceptions of Muslims and Islam based on everyday encounters with their (Muslim) neighbors, and Muslims' perceptions and direct experiences of Islamophobia. We use data collected through a survey and follow-up interviews to support our conceptual argument.