Stereotype formation may be based on the exaggeration of real group differences (category accentuation) or the misperception of group differences that do not exist (illusory correlation). This research sought to account for both phenomena with J. K. Kruschke's (1996, 2001, 2003) attention theory of category learning. According to the model, the features of majority groups are learned earlier than the features of minority groups. In turn, the features that become associated with a minority are those that most distinguish it from the majority. This second process is driven by an attention-shifting mechanism that directs attention toward group-attribute pairings that facilitate differentiation of the two groups and may lead to the formation of stronger minority stereotypes. Five experiments supported this model as a common account for category accentuation and distinctiveness-based illusory correlation. Implications for the natures of stereotype formation, illusory correlation, and impression formation are discussed.