Neighborhood characteristics and the degree of spatial segregation impact location decisions of both the immigrant population and natives in interdependence. Most research on relocation dynamics at the neighborhood level focuses on either outmigration of people, taking into account characteristics of either the origin or destination neighborhood. In contrast, this paper studies bilateral patterns of population flows at the neighborhood level by explicitly assessing the role of bilateral socio-economic, demographic and ethnic differences between the origin and destination neighborhoods as well as between the population flow vis-à-vis the population stock in the origin and destination neighborhoods. In addition, in our analysis we search for differences in relocation behavior across native people and various ethnic groups. To this aim we estimate a gravity equation model of place-to-place population flows between about 150 neighborhoods in the larger agglomerations of the Dutch cities Amsterdam and The Hague, for the period 2004 and 2008. Preliminary results suggest that, even though immigrants’ income increases, some ethnic groups prefer living in neighborhoods with high shares of their own ethnicity. This evidence clearly lends support to the ethnic enclave theory, and shed a different light on the local policies that predominantly aim to counter the tendency to segregation. The policies focus on socio-economic drivers of location choice, while our research suggests that preference heterogeneity may be at least equally important in driving relocation dynamics at the neighborhood level.