Post‐war immigration has produced new ethnic and cultural diversity in European societies. The issues of multiculturalism and interculturalism have also gradually entered the agendas of local and national cultural policy makers. In this article, we explore the development of the relationships between cultural diversity, immigration policy, and cultural policy in Finland. Special attention is given to the capital city of Helsinki. The analysis of policy documents, institutional arrangements and interviews carried out with key actors reveal discrepancies between official intentions and practical solutions. Neither is the incorporation of the diversity into the traditional minority policy unambiguous. Furthermore, the establishment of specific institutions for multicultural affairs is shown to be a possible cause of tensions within the field and to prevent the optimal exploitation of both diversity and the arts in public policy, if certain risks are not recognised.