The social stratification systems of major cities are transforming all around the globe. International research has been discussing this trend and focus on changing occupational classes. However, the precise effects on urban households, taking social welfare and different family arrangements into account, as well as the precise effects on people with a migration background, remain unclear. Using the example of Vienna, this article examines immigration as a key dimension for social stratification. Although household income structures in Austria have remained comparatively stable over the past two decades, the middle‐income share in Vienna (as the sole metropolis in Austria) has dramatically decreased. This predominantly affects people from migrant backgrounds. Using a comprehensive dataset (two waves, N = 16,700 participants, including N = 4,500 migrants), we systematically examine the role of (a) migration‐specific and (b) education‐ and employment‐related factors to explain the decline of middle‐income migrants. The results of multinomial logistic regression and decomposition analyses suggest that transformations in the labour market is the main driving force. Changing migrant characteristics have counteracted this process. If today's migrants displayed similar showed characteristics (e.g., origin and educational levels) to those prevalent in the past decade, the ethnic stratification disparities would have been even stronger.