A growing body of evidence shows that positive student outcomes are associated with racial/ethnic diversity among university STEM instructors. However, few studies to date have been able to provide direct causal evidence identifying the specific mechanism(s) hypothesized to drive the benefits of instructor racial/ethnic diversity. Leaving these mechanisms unexplained may lead both receptive and critical readers to infer that race or ethnicity are somehow "natural" categories that "cause" such outcomes. In this narrative review, we eschew such racial essentialism in favor of an understanding of race as socially constructed, and use an ecological systems perspective to examine how multiple mechanisms of systemic racism operate inside and outside classrooms across multiple levels of analysis. Understanding how these mechanisms relate to each other, and how multiple interconnected mechanisms may drive the benefits of instructor racial/ethnic diversity, could inform the design of policies and practices to disrupt racism and advance equity. By integrating several bodies of psychological and sociological research on systemic racism in STEM and in higher education more broadly, we outline a multi-path model to explain how and under what circumstances STEM instructor racial/ethnic diversity may have particular effects on student experiences or outcomes. We use this model to generate predictions and recommend how researchers could test these predictions in future studies.