As a result of an increased understanding of culture's impact on health and healthcare, cultural competence and diversity curricula have been incorporated into many medical programs. However, little is known about how students develop their cultural competence during their training. This ethnographic case study combined participant observation with interviews and focus group to understand students' views and experiences in developing their cultural competence during clinical placements. The results show that students' development of cultural competence is an individually varied process via four distinctive yet interrelated learning avenues. Immersion in a diverse healthcare environment contributes to students' development of cultural awareness and knowledge. Observation of culturally appropriate or inappropriate practices allows students to enhance their practical skills and critical reflection. Interaction with other clinical professionals, patients, and their family members, enables students' engagement within the busy clinical practice. Reflection helps students to actively think about culture's impact on health and internalize the importance of cultural competence. Students' learning via each avenue is interrelated and constantly interacting with their learning environment, which collectively contributes to their development. Integrating the results allowed the authors to generate a theoretical model that conceptualizes medical students' cultural competence development in clinical placements, which unearths students' cultural learning within the informal and hidden curriculum. This study provides a rare view of students' development of cultural competence in clinical placements, which may inform the pedagogic development of cultural competence and diversity education in medicine and healthcare.