Individual preferences for same-ethnic friends contribute to persistent segregation of adolescents’ friendship networks. Yet, we know surprisingly little about the mechanisms behind ethnic homophily. Prior research suggests that ethnic homophily is ubiquitous, but a social identity perspective indicates that strong ingroup identification drives ingroup favoritism. Combining a social identity perspective with a relational approach, we ask whether the presumed increased homophily of high identifiers extends to all ingroup members, or whether it is conditional on the strength of same-ethnics’ identification. We propose that the strength of ethnic identification affects not only how much individuals desire same-ethnic friends, but also how attractive they are as potential friends to others. Fitting stochastic actor-oriented models to German adolescent school-based network panel data, we find that ethnic homophily is driven by an interplay of peers’ ethnic identification: high identifiers befriend same-ethnic peers who share their strong ethnic identification, while excluding same-ethnic low identifiers. Low identifiers, in turn, tend to avoid befriending inter-ethnic high identifiers. Our relational approach reveals that ethnic homophily is hardly ubiquitous but requires strong identification of both parties of a (potential) friendship.