In this dissertation I aim to show that there has been a shift in racial formation in the United States since the terrorist attacks of September 11th. I chart this new racial formation through theorizing from the everyday realities of working class, predominantly Muslim, South Asian and Indo-Caribbean youth in New York City, some of whom were undocumented. By utilizing ethnographic methods, I dissect their seemingly contradictory lived experiences of 1) national belonging stemming from multicultural comfort in a city famous for its diversity and 2) exclusion from cultural citizenship dictated by struggles with modes of racialization, surveillance, and criminalization more commonly associated with Arabs, Blacks, and Latinos. I map out the current racial formation, which explains South Asians' paradoxical positioning, through examining the intersection of state policies with intersubjective and emotional experiences of race and racism. I find that South Asians' seemingly contradictory positioning is produced through three mechanisms of the current racial formation: the emphasis on diversity and pervasiveness of color blind ideology; shifting notions of race that criminalize widening domains of difference, especially religion and immigration status; and national security panics centered on youth, terrorism, and crime. I demonstrate how multicultural belonging, color blind ideology, and racial exclusion -- despite their apparent contradictions -- shape cultural citizenship and function together as a means of social control in the 21st century. Analyzing the paradoxical position of South Asians, as the country moves toward becoming a majority minority nation, can lead to revelations about race and racism, their connections with cultural citizenship, and their relations to power beyond a single scale. Understanding racial formation after September 11th provides the possibility to learn about race more broadly -- including its continued significance and its evolution during times of war, nativism, and coalition building.