This paper highlights some limitations of research on the contact hypothesis. In the first section, we criticize the practice of describing social intercourse between groups in terms of predefined categories, which tend to void the process of its situated meanings, often reducing it to a quantitative index. Intergroup contact, we argue, acquires meaning within everyday practice and argumentation as individuals try to make sense of others' co‐presence. By disregarding this, researchers have overlooked how lay accounts of contact, and of the nature of the social groups in contact, may accomplish racism. In the second section, illustrating this argument, we examine a recent case of desegregation in South Africa. This concerns the relocation of a ‘black’ squatter community into an area that was designated ‘white’ during the apartheid era. Through discourse analysis of interview data, we identify several constructions of interaction between ‘squatters’ and ‘property owners’. We focus on a set of accounts in which contact was portrayed as a form of territorial invasion, exploring their local rhetorical and broader ideological functions.