When someone expresses prejudice against an outgroup, how negatively do we judge the prejudiced individual and his or her ingroup? Previous lines of research suggest that the answer depends on the ingroup's entitativity—i.e., how cohesive it is—but they make different predictions about whether entitativity should increase or decrease outside observers’ negative reactions to prejudice. We resolve this tension by demonstrating divergent consequences of entitativity for prejudiced individuals versus their groups. Mediational and experimental data from six studies (two pre-registered; N = 2455) support two hypotheses: Entitativity increases how responsible the group seems for its member's prejudice, which in turn decreases how unacceptable observers find the member's behavior and how much they condemn her (H1), but which also increases how much they condemn the group (H2). Thus, entitativity can grant individuals a license to express prejudice but can damage their group's reputation.