This paper presents a social-psychological study of caste stereotyping in higher education in India. It is about the lives of dalit students and their experiences of navigating through educational spaces with the awareness of being targets of stereotyping associated with their caste identity in the academic domain. With the help of in-depth interviews, the study delves into how dalit students respond to negative caste stereotyping, and what facilitates these responses. Fourteen dalit students (male = 8, female = 6) studying at two central universities in Delhi (India) participated in the study. The interviews were transcribed and analysed using reflexive thematic analysis. The analysis helped develop the following two themes: (1) The pervasiveness of caste stereotyping in the academic domain: ‘How can their handwriting be so good?’, (2) Institutional climate shapes responses to stereotyping: ‘this is not a personal issue, it is an entire group’s issue’. The analysis shows dalit students’ active efforts to navigate the negative caste stereotyping in educational contexts. Specifically, the analysis highlights the role of institutional climate in shaping these responses and transforming vulnerability (because of caste-based stereotyping and stigma) to empowerment and assertion. While the passivity and subordination of stigmatised groups such as dalits are taken for granted, this research demonstrates that given a conducive social environment such as a supportive institutional climate, dalit students’ experience of higher education may be positively impacted. The role of institutional climate in the empowerment of disadvantaged group identity and elements that promote such a climate are discussed.