To address the dearth of research on the process and meaning participants make of intergroup contact in settings of intractable conflict, Israeli, Palestinian and US youth were randomly assigned to conditions of dialogue-based contact rooted in distinct social psychological theories. Over a 2-week period, participants completed diaries containing surveys of psychological experience and space for free reflection. US youth reported lower levels of engagement, social identity salience and positive mood relative to Israelis and Palestinians. Qualitative data revealed a pattern of detachment and dissatisfaction among US youth. Compared with participants in a recategorization condition, participants in a mutual differentiation condition of dialogue reported lower levels of self-consistency and higher levels of intergroup differentiation over time, suggesting the effectiveness of this approach to initiate a process of self-reflection and intergroup distinctiveness. Palestinian participants in the mutual differentiation condition reported higher levels of empowerment and positive mood throughout contact relative to all other participants, suggesting the effectiveness of this approach to challenge power asymmetries and its positivity for the low-status group. Results are discussed in terms of innovative methodological approaches to study intergroup processes in contact settings. © 2013 John Wiley & Sons, Ltd.