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Historically, numerous contextual factors have influenced the practice of differentiating students. Scholars and practitioners consider it a context-sensitive practice subject to negotiations and entanglements among various agents, groups, interests, ideas, and values. Drawing on Foucault, this article pursues the practices, negotiations, and entanglements surrounding differentiation processes and IQ testing’s use in the early Danish welfare state. We argue that the differentiating practice of IQ testing in the Danish educational system resulted from various factors, including the increasing professionalisation of the educational system. This practice entailed an increased division of labour among professional groups; debates reflecting differing ideas about eugenics, heredity, and social equality; the schooling of psychologists and psychiatrists in Denmark; and the development of psychology and psychiatry as academic disciplines. In that sense, we will demonstrate that changes in society’s understanding of intelligence incorporating a greater use of environmental explanations can be said to reflect the emerging welfare society’s security mechanisms, and a willingness to cope with and address social inequality in an evolving and supposedly universalistic Danish welfare state.