The aim of the present study is to examine whether, and to what extent, community type affects ethnic inequalities in educational and occupational attainment in Israel. During the period of mass immigration in the 1950s, the government built several dozens of development towns in the periphery with the aim of settling the flow of new immigrants while, at the same time, realizing Jewish sovereignty over state-controlled lands. The development towns were settled mostly by new immigrants, especially those from North Africa. To this very day, the vast majority of development town residents are descendants of those immigrants. Past research has shown that education level, occupational status, and income in development towns are substantially lower than in other urban communities. These findings led some scholars to conclude that development towns have a depressing effect on the attainments of their residents, and since most of them are of Middle East and North African origins, development towns are responsible for the inequalities between these groups and the more privileged Ashkenazim. Similarly, the low educational and occupational achievements of the Arab citizens of Israel are usually considered to be the result of a dearth of educational resources in the Arab localities, and the lack of a reasonable occupational infrastructure. We believe that these conclusions, nearly all of which are based on cross-section surveys, are premature. In order to achieve a better understanding of the stratifying effects of the peripheral communities, we analyzed an integrated data set that contains individual-level information from the 1983 and 1995 population censuses as well as parental information from the 1983 census. The data set includes 13,285 records of young adults who, in 1995, were between the ages of 27 and 34. We found that residence in a development town negatively affected the chances of achieving a matriculation certificate, but not the likelihood of receiving higher education or occupational achievements. Furthermore, we found that the differential distribution of population groups among localities is not an important factor in creating educational and occupational inequality among different ethnic and national groups.