Emotional facial expressions provide important nonverbal cues in human interactions. The perception of emotions is not only influenced by a person's ethnic background but also depends on whether a person is engaged with the emotion-encoder. Although these factors are known to affect emotion perception, their impact has only been studied in isolation before. The aim of the present study was to investigate their combined influence. Thus, in order to study the influence of engagement on emotion perception between persons from different ethnicities, we compared participants from China and Germany. Asian-looking and European-looking virtual agents expressed anger and happiness while gazing at the participant or at another person. Participants had to assess the perceived valence of the emotional expressions. Results indicate that indeed two factors that are known to have a considerable influence on emotion perception interacted in their combined influence: We found that the perceived intensity of an emotion expressed by ethnic in-group members was in most cases independent of gaze direction, whereas gaze direction had an influence on the emotion perception of ethnic out-group members. Additionally, participants from the ethnic out-group tended to perceive emotions as more pronounced than participants from the ethnic in-group when they were directly gazed at. These findings suggest that gaze direction has a differential influence on ethnic in-group and ethnic out-group dynamics during emotion perception.