In this chapter, I review the role of social psychological processes in studies of neighborhoods and inequality. The review emphasizes studies leading up to and following from W. J. Wilson’s seminal book The Truly Disadvantaged (1987). Three major topics are reviewed. First, I review early theories and empirical studies of the effects of urbanism and urban environments on individuals and social life. Second, I review studies of “neighborhood effects,” including both long-term development effects and more immediate effects on crime and mental health. Third, I review studies of social psychological processes that influence neighborhood formation and racial segregation, including studies of preferences for race-of-neighbors and studies of neighborhood stereotyping.