Beyond individuals’ personal attitudes, stereotypes, and prejudice as well as broader social and structural barriers, a growing field of scholarly inquiry has suggested that gender and racial inequality may arise from accommodating opinions, perspectives, desires, or interests held by individuals or entities who are not directly involved in a given decision making process or social situation (i.e., third-party bias). Despite the prevalence of such an insidious, transitive reproduction of inequality, research in this vein has evolved separately across social science disciplines, precipitating theoretical fragmentation that disrupts a coherent understanding of this phenomenon and the mechanisms through which it emerges to disadvantage women and racial minorities. In this Perspectives article, we formulate a unified theory of third-party bias by systematically analyzing and integrating relevant knowledge in different domains. We first conceptualize this construct and compare it to other common forms of bias. We then propose a comprehensive framework that accounts for why and how third-party bias arises in various social relational contexts, the consequences it engenders, and strategies for mitigating it. Our integrative theory establishes theoretical consensus on this important yet undertheorized derivative mechanism of discrimination for future scholarly inquiry. Our emphasis on the inter-party transferability of bias further sheds light on a within-actor dynamic fluctuation of bias—individual actors’ discriminatory attitudes and behaviors may vary considerably across social interactional contexts. Such a dynamic perspective of bias initiates new vistas in management scholarship, and more expansively, in social sciences regarding how to facilitate social and economic equality.