Principals' understanding and skills pertaining to diversity are important in leading diverse schools and preparing all students for a democratic and multicultural society. Although educational leadership scholars have theorized about exemplary leadership of and for diversity, a developmental perspective on principals' diversity or cultural competence remains absent. This conceptual paper argues that the Developmental Model of Intercultural Sensitivity (DMIS) offers a powerful theory for understanding how principals may experience and interpret issues of difference and diversity in schools. After highlighting key aspects of the DMIS, hypothetical examples of principal interpretations and actions to a racial/ethnic achievement gap are provided. Finally, implications for principal preparation, practice, and research are discussed. (Contains 1 figure, 1 table, and 1 note.)