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Does electoral competition increase affective polarization? Can inter-party cooperation depolarize voters? Addressing these questions is challenging since both competition and cooperation are endogenous to political attitudes. Building on social identity theory and leveraging a natural experiment unfolding over seven Israeli election studies, we demonstrate that the enhanced salience of electoral competition increases affective polarization. We then consider whether inter-party cooperation can depolarize the electorate. To do so, we further build on theories of coalition ambivalence and party brands and leverage the ambiguity around coalition building following elections of Israel’s 22nd Knesset, to implement a survey experiment where we credibly shape respondents’ perceptions regarding the likelihood that a unity government will form. We find that priming party cooperation in the form of a unity government promotes tolerance across partisan lines. Our studies contribute to the affective polarization literature by identifying institutional causes and remedies of polarization in a comparative context.