We consider the relationship between cultural dynamics, urban segregation and inequality. To this end, we develop a model of neighbourhood formation and cultural transmission. The tension between culture preservation and socioeconomic integration drives the pattern of segregation in the city. We study the dynamics of culture and urban configurations. In the long run, the city may end-up segregated or integrated depending on cultural distance and the initial cultural composition of the population. We also show that segregation fosters the influence of family background on economic fate. Finally, segregation has ambiguous effects for long-run efficiency.