Overcoming environmental challenges requires understanding when and why individuals adopt cooperative behaviors, how individual behaviors and interactions among resource users change over time, and how group structure and group dynamics impact behaviors, institutions, and resource conditions. Cultural multilevel selection (CMLS) is a theoretical framework derived from theories of cultural evolution and cultural group selection that emphasizes pressures affecting different levels of social organization as well as conflicts among these levels. As such, CMLS can be useful for understanding many environmental challenges. With this paper, we use evidence from the literature and hypothetical scenarios to show how the framework can be used to understand the emergence and persistence of sustainable social–ecological systems. We apply the framework to the Balinese system of rice production and focus on two important cultural traits (synchronized cropping and the institutions and rituals associated with water management). We use data from the literature that discusses bottom-up (self-organized, complex adaptive system) and top-down explanations for the system and discuss how (1) the emergence of group structure, (2) group-level variation in cropping strategies, institutions, and rituals, and (3) variation in overall yields as a result of different strategies and institutions, could have allowed for the spread of group-beneficial traits and the increasing complexity of the system. We also outline cultural transmission mechanisms that can explain the spread of group-beneficial traits in Bali and describe the kinds of data that would be required to validate the framework in forward-looking studies.