Multiculturalism has become an important focus in debates in Germany over the last twenty years, especially in relation to issues of nationality. As Germany still does not define itself officially as an immigrant society, the presence of ethnic diversity presents a number of challenges. Populist and official definitions of citizenship and nationality have still not been extended to cultural minorities and immigrants. In this article, the recent debates and political changes during the Schröder Government (1998-2005) are explored. The article argues that many policies, especially at the local level, have sought to address cultural conflict through pragmatic, but limited, options. It is unclear, however, whether the overall discourse in Germany will turn from a universalist perspective to a 'politics of recognition' of cultural difference.