A common finding in the source monitoring literature is that greater similarity impairs source discriminability. Experiments traditionally manipulate similarity overtly by describing or showing sources with explicitly differentiable features. However, people may also infer source characteristics themselves, which should also affect discriminability. Two studies examined inferred source characteristics by capitalizing on the out-group homogeneity effect, whereby in-group members are conceptualized as more diverse than out-group members. Participants learned about two sources who were described only as members of an in-group or an out-group and whose actions did not have higher a priori association with either group. Source memory was superior when participants believed the sources to be in-group members. This demonstrates that people spontaneously include inferred features with source representations and can capitalize on these features during source monitoring. Interestingly, information suggesting membership in one's in-group improved performance even for sources who had previously been considered out-group members (Experiment 2).