Exploiting complete census manuscript files, we derive a new segregation measure using the racial similarity of next-door neighbors. The fineness of our measure reveals new facts not captured by traditional segregation indices. First, segregation doubled nationally from 1880 to 1940. Second, contrary to prior estimates, Southern urban areas were the most segregated in the country and remained so over time. Third, increasing segregation in the twentieth century was not strictly driven by urbanization, black migration, or white flight: it resulted from increasing racial sorting at the household level. In all areas—North and South, urban and rural—segregation increased dramatically.