In any diverse society, public policy can help to provide equal access to opportunities for achieving one’s potential in school and work. However, even as policies in the United States have sought to eradicate institutionalized discrimination on the basis of race or sex, women and minorities continue to underperform academically and are systematically underrepresented in the highest earning occupations. Social psychological research suggests that negative stereotypes about women and minorities can create subtle barriers to success through stereotype threat. This occurs when individuals become concerned that they might confirm a negative stereotype about their group. This article outlines current research on the processes that underlie stereotype threat and how this work informs effective policies to reduce its effects. Using an evidence-based analysis, we review the risks and the benefits of four policies to narrow gender and racial gaps in academic and workplace performance: affirmative action, diversity training, creating identity-safe environments, and teaching coping strategies. Policies informed by social psychological theory and research can help recover the lost human potential due to stereotype threat without disadvantaging or cuing backlash among the majority.