While studies commonly show differences in out-migration between ethnic groups, ethnicity most often features no more than a side note in the emigration literature, and we have very little insight about why people from different ethnic groups migrate at different rates. Understanding ethnic differences in migration rates and destination choice has important implications for the present-day and future potential for either dampening or exacerbating ethnic discrimination and opportunity structures. Building on existing migration theory, we identify three possible mechanisms through which ethnicity might influence out-migration rates and destination choice: human and economic capital, contemporary discrimination, and historical legacies that are perpetuated through social networks. Our empirical investigation uses longitudinal (panel) survey data from Nepal and we find that all three of these mechanisms likely influence out-migration and destinations of the five major ethno-caste groups. However, we show that historical legacy and human and economic capital emerge as the key drivers of ethnic differences in out-migration here. We discuss what these results mean for migration studies as well as the potential for the institution of migration to affect patterns of ethno-caste-based disadvantage in Nepal. The theoretical basis and empirical evidence from our study also suggest ways to understand the reasoning for and consequences of ethnic and racial differentials in migration patterns in other areas of the world.