Genetic association studies in admixed populations allow us to gain deeper understanding of the genetic architecture of human diseases and traits. However, population stratification, complicated linkage disequilibrium (LD) patterns, and the complex interplay of allelic and ancestry effects on phenotypic traits pose challenges in such analyses. These issues may lead to detecting spurious associations and/or result in reduced statistical power. Fortunately, if handled appropriately, these same challenges provide unique opportunities for gene mapping. To address these challenges and to take these opportunities, we propose a robust and powerful two-step testing procedure Local Ancestry Adjusted Allelic (LAAA) association. In the first step, LAAA robustly captures associations due to allelic effect, ancestry effect, and interaction effect, allowing detection of effect heterogeneity across ancestral populations. In the second step, LAAA identifies the source of association, namely allelic, ancestry, or the combination. By jointly modeling allele, local ancestry, and ancestry-specific allelic effects, LAAA is highly powerful in capturing the presence of interaction between ancestry and allele effect. We evaluated the validity and statistical power of LAAA through simulations over a broad spectrum of scenarios. We further illustrated its usefulness by application to the Candidate Gene Association Resource (CARe) African American participants for association with hemoglobin levels. We were able to replicate independent groups' previously identified loci that would have been missed in CARe without joint testing. Moreover, the loci, for which LAAA detected potential effect heterogeneity, were replicated among African Americans from the Women's Health Initiative study. LAAA is freely available at . https://yunliweb.its.unc.edu/LAAA.