The other-race effect (ORE) refers to poorer recognition for faces of other races than one's own. This study investigates the neural and representational basis of ORE in East Asian and White participants using behavioral measures, neural decoding, and image reconstruction based on electroencephalography (EEG) data. Our investigation identifies a reliable neural counterpart of ORE, with reduced decoding accuracy for other-race faces, and it relates this result to higher density of other-race face representations in face space. Then, we characterize the temporal dynamics and the prominence of ORE for individual variability at the neural level. Importantly, we use a data-driven image reconstruction approach to reveal visual biases underlying other-race face perception, including a tendency to perceive other-race faces as more typical, younger, and more expressive. These findings provide neural evidence for a classical account of ORE invoking face space compression for other-race faces. Further, they indicate that ORE involves not only reduced identity information but also broader, systematic distortions in visual representation with considerable cognitive and social implications.