Having positive and meaningful social connections is one of the basic psychological needs of students. The satisfaction of this need is directly related to students' engagement--a robust predictor of educational achievement. However, schools continue to be sites of interethnic tension and the educational achievement of ethnically-minoritized students still lags behind that of their ethnic majority peers. The goal of the present study was to provide a quantitative account of the current segregated learning environments in terms of multicultural curriculum and instruction, as well as their possible impact on student outcomes that can mitigate these challenges. Drawing upon Self-Determination Theory, we investigated the extent to which the use of multicultural practices can improve students' engagement and whether this relationship is mediated by students' peer relationships. With data from 34 upper primary school classroom teachers and their 708 students, our multigroup analysis using structural equation modeling indicated that, in classrooms with a low (compared with high) minoritized student concentration, peer relationships can mediate the positive as well as negative effects of different dimensions of multicultural education on student engagement.