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Young multi-ethnolectal speakers of Hamburg-German introduced an alternation of /ç/ to [ʧ] following a lax front vowel /ɪ/. We conducted perception studies exploiting this contrast in Berlin (Germany), a city with large multi-ethnic neighborhoods. This alternation is pervasive and noticeable, it is mocked and stigmatized and there is an awareness that many young speakers (including ethnically Germans) from neighborhoods with larger migrant populations like Kreuzberg (KB) substitute /ç/ with /ʃ/ while speakers from less stigmatized vicinities like Zehlendorf (ZD) do not. The categorization of items on two 14-step synthesized continua from "Fichte" 'spruce' to "fischte" '3rd p. sg. to fish' by 99 listeners shows that the interpretation of fine phonetic detail is strongly influenced by the co-presentation of the label KB or ZD in contrast to no label (control). Analyses of the reaction times (RTs) show that significantly more time is needed to process stimuli in KB and less in ZD. Moreover, younger listeners (below 30 years) perceive more /ʃ/ variants than older listeners. Phonological generalization over phonetic input is dependent on associative information: perceptual divergence is found within the confines of a single large urban area.