The paper argues that from the early days of white settlement Australia's racial and ethnic relations operated with two distinct but fundamentally related concepts — assimilation and exclusivism. Both policies have been implemented in regard to German immigrants at various times in Australia's history. The settlement policies of the post- World War II period progressed from a somewhat virulent assimila tionist approach accompanied by an active interest in the concept and practice of naturalisation, to a policy of integration/interactionism identified with a less strident approach to the naturalisation issue, arriv ing eventually at the concept or ideology of multiculturalism and citizenship as propounded in contemporary Australia. A synoptic history of German immigration into South Australia and Victoria offers evidence of a long tradition of non-assimilation; cultural and social segregation being more pronounced and visible in rural areas and in the pre-war era. Although during the last 30 years Germans in Australia have remained a culturally distinct category of people, their geographical dispersion, a low public profile, a relatively favoured posi tion in the economic structure, and a high naturalisation rate have con tributed not only to the assumption that German immigrants are assimilated but also to the creation of the naturalisation/assimilation equation.