Intercultural policies have gained salience in integration and regional development strategies in cities such as Berlin and in EU and European policy networks. Critiquing multiculturalism for having produced segregation by recognizing cultural communities, proponents of interculturalism (e.g. Wood and Landry 2008) emphasize the importance of intercultural exchange and an individual right to cultural identity combined with equality of opportunity as well as the political advertising of the value of diversity. This value, it is argued, is also economic, as intercultural exchange sparks creativity, which fosters innovation, which enhances competitiveness. Intercultural cities, it is posited, are moreover attractive to investors and the high-skilled. Based on research in Berlin and the analysis of EU documents, this paper examines why policy-makers have come to embrace interculturalism as an alternative to multiculturalism and the limits it entails for the recognition of diversity. It argues that despite its seeming inclusivity, interculturalism poses limits to what counts as support-worthy diversity which derive from liberal and neoliberal norms and the political prioritization of increased competitiveness in the neoliberal economy. Interculturalism thus feeds into the dismantling of welfare entitlements as well as processes of gentrification in the city that challenge the right to place of particular immigrant populations. Diversity in the intercultural frame thus appears as a partial concept built around particular notions of culture and class. This also becomes apparent in the anxiety that intercultural policies and policy-makers continue to betray about difference (see Eriksen 2006) - as opposed to diversity in the above sense.