Researchers at the University of Manchester say diversity is associated with higher social cohesion and a greater tolerance of each other's differences.
They also found that someone from an ethnic minority is less likely to report racial discrimination in an ethnically diverse neighbourhood.
And that a neighbourhood's high level of deprivation - rather than diversity - is linked with poor physical and mental health, low social cohesion and race discrimination.
The findings, based on analysis of census and survey data, will be presented tomorrow at a conference attended by the study researchers, policy makers and community organisations
Professor James Nazroo, director of the university's Centre on Dynamics of Ethnicity, said: "Our research and this conference is all about setting the record straight on those diverse neighbourhoods which are so widely stigmatised.
"So often we read in our newspapers and hear from our politicians that immigration and ethnic diversity adversely affect a neighbourhood, but careful research shows this to be wrong.
"In fact, the level of deprivation, not diversity, is the key factor that determines these quality of life factors for people in neighbourhoods.
"So our research demonstrates the disadvantages of living in deprived areas but the positives of living in ethnically diverse areas.
"It's deprivation which affects those Caribbean, Black African, Pakistani, and Bangladeshi people who are disproportionately represented in these neighbourhoods, as well as those white people who live alongside them."
Also according to the researchers, one in five (20%) people identified with an ethnic group other than White British in 2011 compared with 13% in 2001.
The ethnic minority populations of England and Wales lived in more mixed areas in 2011 and this mixing has accelerated over the past 10 years, says the study.
Traditional clusters of ethnic minority groups have grown but the rate of minority population growth is greatest outside these clusters with ethnic diversity spreading throughout the country.
Fellow researcher Dr Nissa Finney said: "Despite the clustering of ethnic minority people in some areas, the vast majority of ethnic minority people have a strong sense of belonging to Britain, feel part of Britain and feel that Britishness is compatible with other cultural or religious identities."
While colleague Dr Laia Becares said: "Increased diversity is beneficial for all ethnic groups so we say the policy agenda should develop strategies for inclusiveness rather than marginalising minority identities, religions and cultures.
"Policies aimed at reducing the stigmatisation of diverse neighbourhoods and promoting positive representations can only be a good thing."
The conference, entitled 'Diverse Neighbourhoods: Policy messages from The University of Manchester', will take place at Manchester Town Hall.