With rising nationalism across the world, and increased tension between East and West, internationalisation of tertiary education is arguably more important than ever before. This paper reports on a study of international and local students' experiences of intercultural encounters in two Hong Kong universities. More than 100 students from all over the world participated in small-group sharing sessions about the challenges and positive experiences they had encountered during their studies in the City. Using a discourse analytic approach, the article analyses some negative and some positive examples of intercultural encounters. The examples of 'unsuccessful' encounters show that students use their own cultural frame of reference to judge the behaviour of the other. An unexpected finding was that students with lesser perceived cultural differences struggled the most overcoming intergroup differences and animosities. The essence in the examples of 'successful' intercultural encounters is that students engaged in genuine intercultural dialogue and created a third space together and this changed them. They realised that you can accept cultural differences without understanding them, and this is arguably what internationalisation should be about.