Mass media convey deep divisions among citizens despite scant evidence for such ideological polarization. Do ordinary citizens perceive themselves to be more extreme and divided than they actually are? If so, what are the ramifications of such misperception? A representative sample from California provides evidence that voters from both sides of the state’s political divide perceive both their liberal and conservative peers’ positions as more extreme than they actually are, implying inaccurate beliefs about polarization. A second study again demonstrates this finding with an online sample and presents evidence that misperception of mass-level extremity can affect individuals’ own policy opinions. Experimental participants randomly assigned to learn the actual average policy-related predispositions of liberal and conservative Americans later report opinions that are 8–13% more moderate, on average. Thus, citizens appear to consider peers’ positions within public debate when forming their own opinions and adopt slightly more extreme positions as a consequence.