Studies of nationalism have only rarely explored the intra-national stratification associated with the politics of nation-building. The article focuses on these processes from a spatial perspective, by studying the population of 'internal frontiers' in settler societies, focusing on the case of Israel. The settlement of the frontiers in the Israeli 'ethnocracy' exacerbated the marginalized incorporation of Mizrahi (Eastern Jews), as many of them were settled in peripheral, low-status and segregated localities. These structural conditions help explain the persisting disparities between Ashkenazi and Mizrahi Jews. The case of Israel thus exposes a paradox: the very frontier settlement promoted as essential for nation-building may cause intra-national fragmentation and conflict.