The current study examined the relationship between faculty gender diversity (GD) and college and university level outcomes and the role that diversity climate (DC) plays in these relationships in a sample of N = 282 4-year, public and private, non-profit, degree granting institutions in the U.S. Based on social categorization and signaling theories, we hypothesized a negative effect of increasing percentages of female faculty on institutional student graduation and retention rates measured at three points in time. We also hypothesized that these negative effects would be attenuated in higher education institutions with more positive DCs. Results revealed that faculty GD had a consistent linear negative effect on graduation and retention rates with little evidence for a moderating effect of DC. Supplemental analyses using cross-lagged panel analyses on a larger sample of 4-year, public and private, non-profit, U.S. degree granting institutions found that these negative effects were consistent across time, lending support for the causal effect of faculty GD.