This paper examines how heightened religious consciousness occasioned by Islamic revivalism affects the structure of relationships between groups of different religious and ethnic backgrounds in a multi-ethnic urban community in Malaysia. Since its exposure to resurgent Islam in the 1970s, there gradually evolved in the community of Pekan Raja two camps holding divergent views with regard to Islam’s role in modern society: the ‘moderate’ and ‘extremist’ Muslims. While the former revitalized Islamic beliefs and rituals through accommodation to consumerism, the modern urban lifestyle and existing hierarchical social relationships, the latter totally rejected traditional cultural elements in favour of an egalitarian and theocratic social system. As the two groups consolidated their positions, religion, which previously played a less crucial role relative to ethnicity, became the major factor guiding individual and collective behaviour in Pekan Raja. The Malay-Muslim residents, for example, ceased to incorporate their non-Malay neighbours into the network of mutual help and support as the latter were seen as spiritually and morally inferior when compared to Muslims. A cleavage also appeared among the Malays as differences in religious orientation and attitudes toward the state and indigenous heritage were used as the rationale for rejecting or supporting cooperation. The paper argues that although the experiences in Pekan Raja may not be generalized to show typical trends in Malaysia, the possibilities are always there for religion to help revitalize ethnicity.