The paper investigates ethnic differences in educational decisions at the transition from primary to secondary schooling. Using a data set that was collected at a number of elementary schools we are able to identify immigrant and German pupils at a specific branching point in their educational career. The empirical analyses reveal that Italian and Turkish children are much more likely than their German age peers to attend the Hauptschule and are accordingly underrepresented in the two more demanding tracks of the German school system. These differences persist also when the average achievement in the two central school subjects "German" and "Maths" is taken into account. We also observe that ethnic origin has a considerable impact on the question whether a child will attend the Hauptschule or not; ethnicity, however, is not important for the question whether it will attend the Realschule or the Gymnasium. Furthermore, the paper investigates context effects of the classroom and the school environment. We find weak effects for the ethnic concentration in the classroom as well as significant effects for school membership.