The North Shore Volcanic Group (NSVG) of northeast Minnesota is a thick (9 km) sequence of plateau volcanic rocks that constitutes an important part of the Midcontinent rift system. This volcanic sequence is unique among the Midcontinent rift lavas, because it is composed of up to 25% rhyolite flows. We have analyzed Sm- and Nd-isotope compositions of 20 of the largest rhyolite and icelandite flows from the NSVG and seven comparably sized granophyres in the subjacent Duluth and Beaver Bay complexes. The lavas vary in composition from primitive basalt and basaltic andesite to icelandite and rhyolite, with a bimodal distribution. The rhyolites have much lower initial εNd values (−2 to −15, most samples < −10) than either the icelandites (0 to −6) or granophyres (0 to −8). Most rhyolites cannot be related to either the icelandites or more mafic magmas by simple fractionation, but rather have been produced by melting and assimilation of older, evolved crust. We suggest that the bimodal magmatism in the NSVG, and probably throughout the Midcontinent rift, has been produced by two fundamentally different processes. The bulk of the magmatism is basaltic; magmas originate in the mantle and migrate through the lithosphère with minor compositional change. Assimilation and fractional crystallization occur to varying degrees in the crust and, in some cases, produce icelandites, some small-volume rhyolites, and the granophyres, with Nd compositions dominated by the mantle component. The melting that produced the large-volume rhyolites is the result of a multistage process induced by these mantle-derived magmas that pond within the crust. This process appears to occur during a period of slowed extension and causes widespread heating and eventually localized extensive melting of the crust.