The present article contributes to the discussions of the link as between diversity and social capital levels by focusing on the process linking diversity and trust. We look at country-level policies rather than individual communities and evaluate how policies can influence the relationship between diversity and generalised trust. We analyse Eurobarometer data (2004) using multilevel analysis. We find a positive effect of diversity on trust, controlling for potentially confounding effect at the individual and country level. Furthermore, we find that the inclusiveness of national policies towards migrants matters. More inclusive policies as measured by the migrant integration policy index (Mipex) counterbalance potentially negative effects of increasing diversity. The findings show that while local place is crucial as the locus where diverse ethnic groups interact, countries remain important policy contexts influencing and framing interactions with immigrants. For Europe, there is nothing inevitable about a negative impact of increasing diversity on building cohesive, trusting societies. We conclude by locating our findings within a wider critical literature.