This study examines the role of diversity management practices (DMP) in employee engagement in Hungary’s service sector. It also studies the mediating role of trust climate in this relationship. Using a self-administered questionnaire completed by 461 foreign employees, the researchers employed structural equation modelling (SEM) to test this model. The results show that trust climate fully mediates the relationship between DMP and employee engagement. Among the studied DMP, diversity training and performance appraisal had the strongest positive impact on trust climate and employee engagement accordingly, while career development had no significant effect. The findings highlight the critical role of trust climate in enhancing the effectiveness of DMP in fostering positive employee outcomes, particularly in multicultural workplaces. This study advances diversity management literature by providing evidence from Hungary, and by emphasizing the strategic importance of trust in enhancing employee engagement through inclusive HRM practices.