Despite evidence identifying the role of group membership in social cognition, the neural mechanisms associated with the perception and evaluation of nonverbal behaviors displayed by in-group versus out-group members remain unclear. Here, 42 white participants underwent electroencephalographic recording while observing social encounters involving dynamic displays of nonverbal behaviors by racial in-group and out-group avatar characters. Dynamic behaviors included approach and avoidance poses and expressions, followed by the participants' ratings of the avatars displaying them. Behaviorally, participants showed longer RTs when evaluating in-group approach behavior compared with other behaviors, possibly suggesting increased interest and attention devoted to processing positive social encounters with their in-group members. Analyses of ERPs revealed differential sensitivity of the N450 and late positivity components to social cues, with the former showing initial sensitivity to the presence of a humanoid avatar character at the beginning of social encounters and the latter showing sensitivity to dynamic nonverbal behaviors displayed by the avatars. Moreover, time–frequency analysis of electroencephalography data also identified suppression of beta-range power linked to the observation of dynamic nonverbal behaviors. Notably, the magnitude of these responses was modulated by the degree of behavioral racial in-group bias. This suggests that differential neural sensitivity to nonverbal cues while observing social encounters is associated with subsequent in-group bias manifested in the evaluation of such encounters. Collectively, these findings shed light on the mechanisms of racial in-group bias in social cognition and have implications for understanding factors related to successful interactions with individuals from diverse racial backgrounds.