This article looks at the deteriorating relations between the local population of North Sulawesi in eastern Indonesia and the approximately 35,000 internally displaced persons (IDPs) who fled there from the neighbouring province of North Maluku. These IDPs fled to North Sulawesi during a period of communal violence in North Maluku that lasted from late 1999 until mid-2000. Although initial relations between the two groups were positive, the extended presence of 35,000 IDPs created several problems, including a decrease in wages and an increase in housing costs. Negative perceptions of IDPs and jealousy over aid led to further misunderstandings. In a similar vein, IDP experiences with civil servants and other locals led them to distrust the host population. I examine how the government's labelling of the displaced as IDPs influenced the dynamic between them and locals. This process of labelling differentiated the IDPs from other migrants to the region. Furthermore, the IDP-centric focus on handling the displaced failed to take into account the social context in which they lived and exacerbated tensions with host communities. The article ends with an examination of efforts made by local and international NGOs to address these tensions, as well as concerns about the possibilities for future conflict.