Large language models (LLMs) increasingly operate in high-stakes settings where demographic attributes such as race and ethnicity may be explicitly stated or implicitly suggested through textual cues. However, existing studies primarily document outcome-level disparities, offering limited insight into internal mechanisms underlying these effects. We present a mechanistic study of how race and ethnicity cues are represented and operationalized within LLMs. Using two publicly available datasets spanning toxicity-related generation and clinical narrative understanding tasks, we analyze three open-source models with a reproducible interpretability pipeline combining probing, neuron-level attribution, and targeted intervention. We find that sensitivity to demographic cues is distributed across internal units and varies substantially across models. These units often align with entangled semantic facets, including explicit group labels, geography, language, culture, and associations related to stereotypes. Interventions on selected units can change some biased prediction patterns, but substantial residual effects remain, suggesting that effective mitigation requires understanding distributed, task-specific mechanisms rather than manipulating a small set of identified neurons alone. Code: https://github.com/LARK-NLP-Lab/LLM-Bias-Interpretability.

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