Do state institutions that empower majority preferences exacerbate disparities in social outcomes? Under what conditions do majoritarian institutions exacerbate inequalities in the American states? Our argument is that equality is most likely to be threatened under majoritarian institutions when (1) there are systemic participatory biases and/or (2) there are widespread prejudices about particular groups in society. We find that majoritarian institutions are associated with larger disparities between white and black life expectancy and poverty rates across the American states, but not educational attainment. We also find that this effect is moderated by racial context, with majoritarian institutions being associated with greater disparities for states with diverse racial contexts and smaller disparities in more homogenous states. These findings suggest that majoritarian institutions operate to the benefit of the white majority, while coming at the cost of minority population outcomes when a racial threat is perceived, and presumably, public opinion is biased.