The impact of the 2015 peak in refugee applications in Europe on immigration attitudes and far right voting is widely studied. However, little is known on how local exposure to refugees affected welfare chauvinism, i.e. the support to exclude immigrants from welfare services. This is the first paper to provide causal evidence on this question. The paper tests preregistered hypotheses derived from intergroup contact and economic and cultural intergroup threat theory using original panel data from Germany (2015/2016/2017, N ≈ 1,500) and administrative data on the allocation of refugees to municipalities. A continuous difference-in-differences approach leveraging the exogenous allocation finds larger refugee immigration to have an overall null effect on welfare chauvinism. However, further analysis reveals substantial treatment heterogeneity: At the individual level, those exposed to more economic threat through refugees and those more likely to perceive refugees as a cultural threat increase in welfare chauvinism if exposed to more refugees. At the municipal level, pre-existing ethnic diversity protects against increases in welfare chauvinism, whereas worse economic conditions and a more anti-immigrant political climate contribute to increased welfare chauvinism with larger refugee immigration. Taken together, the results suggest that in Germany, economic and cultural threat perceptions outweighed intergroup contact in certain municipalities. This raises concerns about the exclusion of immigrants from welfare services in the face of increasing ethnic diversity, and may have policy implications in determining the distribution of refugees.