Existing theories of discrimination focus on discrimination at the individual, societal, or organizational level. We highlight the importance of the dynamic relationship between different institutional actors that jointly give rise to discriminatory outcomes. This reveals that discrimination can be contagious: discrimination that would otherwise not occur at one institutional level can arise due to discrimination at another institutional level. Therefore, discrimination by some actors can trickle down and create disparate impacts in processes that would otherwise be free of discrimination. This phenomenon, which we term “contagious discrimination,” can manifest itself in various settings such as employment and commercial trade negotiations. To illustrate its importance, we focus on the dynamic relationship between plea-bargaining —a critical part of the criminal justice system—and policing. We demonstrate that a defendant who anticipates racially discriminatory arrest by the police may accept a less favorable plea bargain from the prosecutor in comparison to a similarly situated defendant who does not expect such discrimination by the police. This occurs even when the prosecutor is completely race-blind, highlighting how discrimination by law enforcement can lead to discriminatory outcomes at the plea-bargaining stage, thereby illustrating that discrimination can be contagious. We discuss the implications for policies focused on defendants’ perceptions, plea-bargain reform, and legal representation.