While evidence of the contribution of racial discrimination to ethnic health disparities has increased significantly, there has been less research examining relationships between ascribed racial/ethnic categories and health. It has been hypothesized that in racially-stratified societies being assigned as belonging to the dominant racial/ethnic group may be associated with health advantage. This study aimed to investigate associations between socially-assigned ethnicity, self-identified ethnicity, and health, and to consider the role of self-reported experience of racial discrimination in any relationships between socially-assigned ethnicity and health. The study used data from the 2006/07 New Zealand Health Survey (n = 12,488), a nationally representative cross-sectional survey of adults 15 years and over. Racial discrimination was measured as reported individual-level experiences across five domains. Health outcome measures examined were self-reported general health and psychological distress. The study identified varying levels of agreement between participants' self-identified and socially-assigned ethnicities. Individuals who reported both self-identifying and being socially-assigned as always belonging to the dominant European grouping tended to have more socioeconomic advantage and experience less racial discrimination. This group also had the highest odds of reporting optimal self-rated health and lower mean levels of psychological distress. These differences were attenuated in models adjusting for socioeconomic measures and individual-level racial discrimination. The results suggest health advantage accrues to individuals who self-identify and are socially-assigned as belonging to the dominant European ethnic grouping in New Zealand, operating in part through socioeconomic advantage and lower exposure to individual-level racial discrimination. This is consistent with the broader evidence of the negative impacts of racism on health and ethnic inequalities that result from the inequitable distribution of health determinants, the harm and chronic stress linked to experiences of racial discrimination, and via the processes and consequences of racialization at a societal level.