Several methods for testing mediation hypotheses with 2-level nested data have been proposed by researchers using a multilevel modeling (MLM) paradigm. However, these MLM approaches do not accommodate mediation pathways with Level-2 outcomes and may produce conflated estimates of between-and within-level components of indirect effects. Moreover, these methods have each appeared in isolation, so a unified framework that integrates the existing methods, as well as new multilevel mediation models, is lacking. Here we show that a multilevel structural equation modeling (MSEM) paradigm can overcome these 2 limitations of mediation analysis with MLM. We present an integrative 2-level MSEM mathematical framework that subsumes new and existing multilevel mediation approaches as special cases. We use several applied examples and accompanying software code to illustrate the flexibility of this framework and to show that different substantive conclusions can be drawn using MSEM versus MLM. Researchers in behavioral, educational, and organizational research settings often are interested in testing mediation hypotheses with hierarchically clustered data. For example, Bacharach, Bamberger, and Doveh (2008) investigated the mediating role of distress in the relationship between the intensity of involvement in work-related incidents and problematic drinking behavior among firefighting personnel. They used data in which firefighters were nested within ladder companies and all three variables were assessed at the subject level. Using data from customer service engineers working in teams, Maynard, Mathieu, Marsh, and Ruddy (2007) found that team-level interpersonal processes mediate the relationship between team-level resistance to empowerment and individual job satisfaction. Both of these examples-and many others-involve data that vary both within and between higher level units. Traditional methods for assessing mediation (e.g., Baron & Kenny, 1986;MacKinnon, Lockwood, Hoffman, West, & Sheets, 2002;MacKinnon, Warsi, & Dwyer, 1995) are inappropriate in these multilevel settings, primarily because the assumption of independence of observations is violated when clustered data are used, leading to downwardly biased standard errors if ordinary regression is used. For this reason, several methods have been proposed for addressing mediation hypotheses when the data are hierarchically organized.These recommended procedures for testing multilevel mediation have been developed and framed almost exclusively within the standard multilevel modeling (MLM) paradigm (for thorough treatments of MLM, see Bryk, 2002, andSnijders &Bosker, 1999) and implemented with commercially available MLM software, such as SAS PROC MIXED, HLM, or MLwiN. For example, some authors have discussed models in which the independent variable X, mediator M, and dependent variable Y all are measured at Level 1 of a two-level hierarchy (a 1-1-1 design, adopting notation proposed by Krull & MacKinnon, 2001), 1 and slopes either are fixed (Pituch, Whittaker, & Stapleton, 2005...