Many studies have shown that rates of psychosis are elevated in the Black and minority ethnic (BME) population in the UK. One important, but relatively less researched explanation of these high rates may be social adversity associated with acculturation processes. Strong identification with an ethnic minority group subjected to social disadvantage may exert adverse effects on individuals from BME groups. Using data from a large epidemiological case-control study of first-episode psychosis, we aimed to investigate whether strong ethnic identification is a factor contributing to the excess of psychosis in BME groups compared with the White British, after adjustment for perceptions of disadvantage. All cases with a first episode of psychosis presenting to specialist mental health services within tightly defined catchment areas in London and Nottingham, UK, and geographically matched community controls were included in the study. Data were collected on socio-demographic and clinical characteristics, perceptions of disadvantage, and identification with one's own ethnic group. Analysis was performed on data from 139 cases and 234 controls. There was evidence that, as levels of ethnic identification increased, the odds of psychosis increased in the BME but not in the White British group, independent of potential confounders. However, the association between strong ethnic identity and psychosis in BME individuals was attenuated and non-significant when controlled for perceived disadvantage. Strong identification with an ethnic minority group may be a potential contributory factor of the high rates of psychosis in the BME population, the effects of which may be explained by perceptions of disadvantage.