Trust is a crucial asset for any society, and the quest to generate and uphold trust is as crucial as ever. Several contemporary societal developments are proposed as being particularly challenging for upholding and restoring the levels of trust in society, including increasing ethnic diversity, rising inequality and the related geographical segregation. It has been convincingly argued that democratic institutions may generate trust by neutralizing some of these effects. This article explores how the mechanisms of trust differ in segregated, disadvantaged neighbourhoods as opposed to the surrounding general society. The empirical material consists of individual‐level data from a segregated neighbourhood (Vivalla) in a medium‐sized city in Sweden (Örebro), with a random sample from the population of the city (the Vivalla area excluded) as the comparison reference point, representing the general society. In the article, perceived safety is introduced as an important mediator between trust in legal and government institutions and generalized trust, through which the differing mechanisms become evident. In the disadvantaged neighbourhood, it is shown that trust in government institutions has the function of primarily decreasing crime‐related insecurity, which in its turn affects generalized trust. Thus, the relationship is indirect. In the city population, the effect instead goes directly from trust in government institutions to generalized trust. The results suggest that the potentials of different means to build and restore trust are dependent on local context.