First Nations people globally have a higher incidence of mental disorders and non-communicable diseases. These health inequalities are partially attributed to a complex network of social and environmental factors which likely converge on chronic psychosocial stress. We hypothesized that alterations in stress processing and the regulation of the hypothalamic-pituitary-adrenal axis might underlie health disparities in First Nations people. We assessed the cortisol awakening response and the dynamic response to a laboratory induced psychosocial stress of young Indigenous tertiary students (n = 11, mean age 23.82 years) and non-Indigenous students (n = 11) matched for age and gender. Indigenous participants had a blunted cortisol awakening response (27.40 (SD 35.00) vs. 95.24 (SD 55.23), p = 0.002), which was differentially associated with chronic experience of stress in Indigenous (r = -0.641, p = 0.046) and non-Indigenous (r = 0.652, p = 0.03) participants. The cortisol response to the laboratory induced psychosocial stress did not differ between groups. Self-reported racial discrimination was strongly associated with flattened cortisol response to stress (r = -0676, p = 0.022) and with heart rate variability (r = 0.654, p = 0.040). Our findings provide insight into potential biological factors underlying health discrepancies in ethnic minority groups.