This article looks at the changing frameworks for the institutional and cultural incorporation of second-generation rural migrants in Shanghai. Beginning in 2008, Shanghai launched a new policy of accepting migrant children into urban public schools at primary and secondary levels. I show that the hukou (household registration) is still a critical social boundary in educational institutions, shaping uneven distribution of educational resources and opportunities, as well as hierarchical recognition of differences between urbanites and migrants. I have coined the term “segmented incorporation” to characterize a new receiving context, in which systematic exclusion has given way to more subtle forms of institutional segmentation which reproduces cultural prejudice and reinforces group boundaries.