This study investigated neural processes underlying automatic imitation and its modulation by ethnically diverse hand stimuli (Black, White) using event-related brain potentials (ERPs). Automatic imitation relies on motor stimulus-response compatibility (SRC), i.e., response conflict caused by motoric (in)congruency between task-irrelevant hand stimuli and the required response. Our novel task aimed to separate two distinct neuro-cognitive processing stages of automatic imitation and its modulation by ethnicity: the stage of stimulus processing (i.e. perception), comprising presentation of stimulus ethnicity and SRC, and the stage of response execution (i.e. action). Effects of ethnicity were observed in ERPs of different stages of stimulus processing - during presentation of ethnicity (LPP) and SRC (N190, P3). ERPs at response execution, Pre-Motion Positivity (PMP) and Reafferent Potential (RAP), were only sensitive to congruency. The N190 results may index visual self-other distinction, while the neural timecourse of P3 and PMP variation could reflect a dynamical decision process linking perception to action, with motor initiation reflected in the PMP component. The PMP might further index motor-related self-other distinction regardless of ethnicity. Importantly, overt motor execution was not influenced by ethnically diverse stimuli, which suggests generalizability of the automatic imitation effect across ethnicities.