My dissertation analyzes the institutional mechanisms that cause the persistence of class and status inequalities between rural migrants and urban residents in postsocialist Shanghai. I examine how remnants of China's socialist institutions, after the gradualist market reform, continue to stratify rural migrants and their second generation through sociopolitical processes. Making two thirds of the labor force nowadays in China, rural migrants experience social forces in China's emerging market capitalism as well as repercussions from the socialist legacy. Drawing from historical archives and a 12-month ethnographic fieldwork in Shanghai, I demonstrate how rules, norms, organizations and beliefs in contemporary Chinese society make rural or urban residence identities the most salient sites of social distinction. I examine the blending and segregating processes of rural migrants' life in the city. I also analyze how rural migrants respond to social exclusion with a variety of strategies. I argue that since rural migrants and urban residents have been classified into two different forms of citizenship that were deeply rooted in the ideological and organizational structures of Chinese socialism. Economic liberalization alone only led to limited upward social mobility of rural migrants, the new working class in China. Taking rural migrants' experiences in urban China as an exemplar case of path dependent institutional change, I argue that changes in formal rules interact with the persistence of informal institutional elements-customs, networks, norms, and cultural beliefs-to produce persistent status hierarchies. Rural migrants respond to these structural constraints by developing distinctive coping strategies in the labor market, communal life, and education attainment. I argue that the institutional matrix of political, fiscal and economic constraints comprises the deeper causes that determine rural migrants' purposive actions and networks to be advancing segregative more often than intergrative processes.