Americans can become more cynical about the state of society when they see harmful behavior online. Three studies of the American public (n = 1,090) revealed that they consistently and substantially overestimated how many social media users contribute to harmful behavior online. On average, they believed that 43% of all Reddit users have posted severely toxic comments and that 47% of all Facebook users have shared false news online. In reality, platform-level data shows that most of these forms of harmful content are produced by small but highly active groups of users (3–7%). This misperception was robust to different thresholds of harmful content classification. An experiment revealed that overestimating the proportion of social media users who post harmful content makes people feel more negative emotion, perceive the United States to be in greater moral decline, and cultivate distorted perceptions of what others want to see on social media. However, these effects can be mitigated through a targeted educational intervention that corrects this misperception. Together, our findings highlight a mechanism that helps explain how people’s perceptions and interactions with social media may undermine social cohesion.