At the time of the Spanish invasion, central Andean society was organized around ayllus. These extensive social units, bound together by kinship, reciprocity, land claims, honoured ancestors and other criteria, are an example of the kin-based sodalities that have long been seen in political science as impediments to state development. Class should replace kin when large and complex polities like the Inca Empire form, and groups like the ayllu should fade away. This article seeks to re-evaluate the role played by kin-based sodalities in early state formation and expansion through a case study of the Wari State (ce 600–1000). We argue that the decades-long development of ayllus was a reaction to incipient urbanization, surging interregional interaction and the other challenges associated with Wari's rise. Ayllu development created a more heterarchical political structure that would endure some 200 years into the polity's existence. Elite efforts to consolidate power in the ninth century ce ultimately led to the polity's decline and highlight the need to develop more dynamic models of urbanization and state formation in the Andes and elsewhere.