Contributing to recent debates on indigeneity, this article investigates contradictions of indigeneity, especially the “indigenous paradox,” that is, the formation of indigeneity through claiming sovereignty and autonomy from the state by acknowledging the very state and its laws as the framework for those claims, in the context of Indonesia. After analyzing how indigeneity came into existence in the Indonesian context, this article sheds light on the process of indigenous recognition in the Duri highlands, South Sulawesi. It is argued that the contradictions of indigeneity concern not only indigenous—state relations, but also narratives on tradition and history, and most of all, economic contradictions. It is the recognition of the overall framework of capitalism and the state which makes possible the emergence of alternative local economies based upon solidarity. Drawing on Louis Althusser’s concept of overdetermination, this article suggests that indigeneity shapes the way how economic contradictions are expressed, and while it provides local spaces for alternative economies, indigeneity is also prone to being incorporated into the logics of capitalism.