We investigate how activated team faultlines represent an informal sensemaking structure through which teammates interpret their social reality. Constructed from intersubgroup comparisons, activated team faultlines likely result in ambiguous or illegitimate status perceptions. Thus, activated faultlines threaten team justice climate, which drives status conflict, impairing team performance. We explore the effects of team structure clarity in providing certainty or legitimacy around status and structure, ameliorating the negative effect of activated faultlines on team justice climate. We test our model using a multi-source (three sources), multi-wave cross-lagged design (four waves) on a sample of 271 employees and 41 leaders in 41 teams. We find that the negative relationship between activated faultlines and team performance is mediated by the team justice climate–status conflict causal chain. We also find that team structure clarity reduces activated faultlines’ negative effect on team justice climate. Results highlight the value of using team faultlines, the social identity approach, and justice theories to understand how diverse teams interpret their social reality, which influences their performance. Furthermore, our research provides practical guidance to managers in building clear structures that minimize harmful effects of activated faultlines on justice perceptions and team performance.