The study of the promoting effect of common in-group identity on ethnic psychological compatibility has great theoretical and practical value for creating a strong sense of Chinese nation community and strengthening the national integration. By constructing the common superior identity, common in-group identity weakens the inter-ethnic boundary and perceives non-ethnic groups as members of in-group, and thus the positive bias of in-group will be extended to non-ethnic groups. However, will it be possible to promote ethnic psychological compatibility by improving the positive interpretation bias of non-ethnic information? To reveal the cognitive process of common in-group identity’s promotion of ethnic psychological compatibility, two experiments were conducted to explored the mechanism of ethnic psychological compatibility promoted by common in-group identity from the perspective of interpretation bias. Studies have shown that in the absence of competition or conflict, common in-group identity can promote ethnic psychological compatibility. Whether common in-group identity can promote ethnic psychological compatibility in competitive situations remains to be further explored. Experiment 1 investigated the role of on-line interpretation bias in the relationship between common in-group identity and ethnic psychological compatibility in group competition situation. In this study, Zhuang and Miao college students (N=138) were recruited to create a group situation (with or without competition). Through re-categorizing the common in-group identity, and measured on-line interpretation bias (including automatic interpretation and iterative interpretation) and psychological compatibility. Experiment 2, the same participants and experimental paradigm were used to further explores the role of off-line interpretation bias in promoting ethnic psychological compatibility in common in-group identity. The results showed that: (1) The main effect of categorization strategy was significant, with significantly higher ethnic psychological compatibility in the common in-group group than in the independent group.The third-order interaction of categorization strategy, ethnic and situation was significant. In the competitive situation, for the Miao participants, ethnic psychological compatibility was significantly higher for the common in-group group than for the independent group; In the non-competitive condition, ethnic psychological compatibility in the group of common in-group group for Zhuang participants was significantly higher than that the separate group. (2) The mediating effect of automatic positive interpretation bias was significant. (3) The mediating effect of off-line positive interpretation bias was significant. The two experiments jointly proved that, in competitive and non-competitive contexts, common in-group identity can promote ethnic psychological compatibility, and its promotion effect happened at the stage of meaning activation of cognitive processing (automatic positive interpretation) and the post-interpretation of information (off-line positive interpretation). The study improves the stage model of interpretive bias and extends the common in-group identity model. In this study, interpretative bias is classified into three stages of cognitive processing: initial meaning activation of cognitive processing (automatic interpretation), meaning selection of information (iterative interpretation) and post interpretation of information (off-line interpretation), the stages of interpretative bias are refined. Common in-group identity promotes positive inter-group relations because it improves the automatic positive interpretation bias and off-line positive interpretation bias of external group information and expands the common in-group identity model from the perspective of cognitive processing.