Group faultline literature suggests that subgroups impede group functioning. We propose that team conflict may buffer the detrimental effects of faultlines on group performance. We draw on social categorization and group process theories suggesting that the negative effects of fault‐lines are due to increased competition and decreased communication across subgroups and can be diminished with cross‐subgroup information exchange and elaboration. We propose that intragroup conflict in small groups will decrease negative effects of demographic faultlines because detecting conflict and engaging in conflict management require cross‐subgroup communication and information elaboration. In Study 1, using student groups we found that relationship, task, and process conflict buffered the negative effect of demographic faultline strength on group performance. In Study 2, we manipulated conflict and group faultlines (ethnic faultlines vs. no faultlines) and found that group conflict buffered the negative effect of faultlines on group performance. Theoretical contributions and practical implications are discussed.