Grade retention touches upon a tension field between the need for schools to promote cohesion and the need to differentiate students based on their abilities. This tension field may induce frustration among retainees. Following the frustration-aggression hypothesis, frustration might lead retainees to scapegoat minorities and to have diminished levels of intergroup tolerance compared to regularly promoted peers. Furthermore, based on comparative reference group theory, retention composition might moderate the association between being retained and intergroup tolerance. Cross-national multilevel analyses were performed on PISA 2018 data (17 countries; 6,010 schools; 122,246 students). Findings show that retainees have lower levels of intergroup tolerance, and this negative association is larger in countries with fewer other retainees. Implications are discussed.